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Chapter 8: Q4RQ (page 465)
When dealing with receivables, give an example of a subsidiary account
All sales and collections from that customer are tracked in that account, along with the balance.
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Applying the allowance method (aging-of-receivables) to account for Uncollectibles Surf and Sun had the following balances at December 31, 2018, before the year-end adjustments:
Accounts Receivable
81,000 |
Allowance for Bad Debts
Bal. \( 2,063 |
The aging of accounts receivable yields the following data:
Age of Accounts Receivable | |||
0鈥�60 Days | Over 60 Days | Total Receivables | |
Accounts Receivable | \) 78,000 | \( 3,000 | \) 81,000 |
Estimated percent uncollectible | *2% | * 23% |
Requirements
1. Journalize Surf and Sun鈥檚 entry to record bad debts expense for 2018 using the aging-of-receivables method.
2. Prepare a T-account to compute the ending balance of Allowance for Bad Debts.
What is the difference between accounts receivable and notes receivable?
How is the acid-test ratio calculated, and what does it signify?
Applying the direct write-off method to account for uncollectibles
Shawna Valley is an attorney in Los Angeles. Valley uses the direct write-off method to account for uncollectible receivables.
At April 30, 2018, Valley鈥檚 accounts receivable totaled \(19,000. During May, she earned revenue of \)22,000 on account and collected \(15,000 on account. She also wrote off uncollectible receivables of \)1,100 on May 31, 2018.
Requirements
1. Use the direct write-off method to journalize Valley鈥檚 write-off of the uncollectible receivables.
2. What is Valley鈥檚 balance of Accounts Receivable at May 31, 2018?
Question: On December 1, Kyle Corporation accepted a 60-day, 9%, $12,000 note receivable from J. Michael in exchange for his account receivable.
Requirements
1. Journalize the transaction on December 1.
2. Journalize the adjusting entry needed on December 31 to accrue interest revenue. Round to the nearest dollar.
3. Journalize the collection of the principal and interest at maturity. Specify the date. Round to the nearest dollar.
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