Learning Materials
Features
Discover
Chapter 7: Question E7-17 (page 368)
(Transfer of Receivables with Recourse) Ames Quartet Inc. factors receivables with a carrying amount of \(200,000 to Joffrey Company for \)160,000 on a with recourse basis.
Loss on sale of receivables equals$41,000.
Over 30 million students worldwide already upgrade their learning with 91影视!
All the tools & learning materials you need for study success - in one app.
Get started for free
(Expected Cash Flows) On December 31, 2017, Iva Majoli Company borrowed \(62,092 from Paris Bank, signing a 5-year, \)100,000 zero-interest-bearing note. The note was issued to yield 10% interest. Unfortunately, during 2019, Majoli began to experience financial difficulty. As a result, at December 31, 2019, Paris Bank determined that it was probable that it would receive back only $75,000 at maturity. The market rate of interest on loans of this nature is now 11%.
Instructions
(a) Prepare the entry to record the issuance of the loan by Paris Bank on December 31, 2017.
(b) Prepare the entry, if any, to record the impairment of the loan on December 31, 2019, by Paris Bank.
Indicate how the percentage-of-receivables method, based on an aging schedule, accomplishes the objectives of the allowance method of accounting for bad debts. What other methods, besides an aging analysis, can be used for estimating uncollectible accounts?
Presented below are a number of independent situations.
Instructions
For each individual situation, determine the amount that should be reported as cash. If the item(s) is not reported as cash, explain the rationale.
1. Checking account balance \(925,000; certificate of deposit \)1,400,000; cash advance to subsidiary of \(980,000; utility deposit paid to gas company \)180.
2. Checking account balance \(600,000; an overdraft in special checking account at same bank as normal checking account of \)17,000; cash held in a bond sinking fund \(200,000; petty cash fund \)300; coins and currency on hand \(1,350.
3. Checking account balance \)590,000; postdated check from customer \(11,000; cash restricted due to maintaining compensating balance requirement of \)100,000; certified check from customer \(9,800; postage stamps on hand \)620.
4. Checking account balance at bank \(37,000; money market balance at mutual fund (has checking privileges) \)48,000; NSF check received from customer \(800.
5. Checking account balance \)700,000; cash restricted for future plant expansion \(500,000; short-term Treasury bills \)180,000; cash advance received from customer \(900 (not included in checking account balance); cash advance of \)7,000 to company executive, payable on demand; refundable deposit of $26,000 paid to federal government to guarantee performance on construction contract.
What is the normal procedure for handling the collection of accounts receivable previously written off using the direct write-off method? The allowance method?
(Bad-Debt Reporting) Presented below is information related to the Accounts Receivable accounts of Gulistan Inc. during the current year 2017.
1. An aging schedule of the accounts receivable as of December 31, 2017, is as follows.
Age | Net Debit Balance | % to be applied after correction is made |
Under 60-days | \(172,342 | 1% |
60-90 days | 136,490 | 3% |
91-120 days | 39,924 | 6% |
Over 120 days | 23,644 | \)3,700 definitely uncollectible; estimated remainder uncollectible is 25% |
\(372,400 |
*The \)3,240 write-off of receivables is related to the 91-to-120 day category.
2. The Accounts Receivable control account has a debit balance of \(372,400 on December 31, 2017.
3. Two entries were made in the Bad Debt Expense account during the year: (1) a debit on December 31 for the amount credited to Allowance for Doubtful Accounts, and (2) a credit for \)3,240 on November 3, 2017, and a debit to Allowance for Doubtful Accounts because of a bankruptcy.
4. Allowance for Doubtful Accounts is as follows for 2017.
Allowance for Doubtful Accounts | |||||
Nov 3 | Uncollectible accounts written off | 3,240 | Jan 1 | Beginning balance | 8,750 |
Dec 31 | 5% of \(372,400 | 18,620 |
5. A credit balance exists in Accounts Receivable (60鈥�90 days) of \)4,840, which represents an advance on a sales contract.
Instructions
Assuming that the books have not been closed for 2017, make the necessary correcting entries.
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Flashcards 
91影视 AI 
Notes 
Study Plans 
Study Sets 
Find a degree 
Magazine