FinancialAccounting-OP_YioY6nY-127

Prévia do material em texto

18. 9.4 Michelle Company reports $345,000 in credit sales and $267,500 in accounts receivable at the end of
2019. Michelle currently uses the income statement method to record bad debt estimation at 4%. To manage
earnings more efficiently, Michelle changes bed debt estimation to the balance sheet method at 4%. How
much is the difference in net income between the income statement and balance sheet methods?
A. $3,100
B. $13,800
C. $10,700
D. $77,500
19. 9.6 Which of the following is true of a maturity date?
A. It must be calculated in days, not in months or years.
B. It is the date when principal and interest on a note are to be repaid to the lender.
C. It is the date of establishment of note terms between a lender and customer.
D. It is not a characteristic of a note receivable.
20. 9.6 Mark Industries issues a note in the amount of $45,000 on August 1, 2018 in exchange for the sale of
merchandise. Which of the following is the correct journal entry for this sale?
A.
B.
C.
D.
21. 9.6 A customer takes out a loan of $130,000 on January 1, with a maturity date of 36 months, and an
annual interest rate of 11%. If 6 months have passed since note establishment, what would be the recorded
interest figure at that time?
A. $7,150
B. $65,000
C. $14,300
D. $2,383
22. 9.6 A company collects an honored note with a maturity date of 24 months from establishment, a 10%
interest rate, and an initial loan amount of $30,000. Which accounts are used to record collection of the
honored note at maturity date?
A. Interest Revenue, Interest Expense, Cash
B. Interest Receivable, Cash, Notes Receivable
C. Interest Revenue, Interest Receivable, Cash, Notes Receivable
D. Notes Receivable, Interest Revenue, Cash, Interest Expense
Chapter 9 Accounting for Receivables 621
23. 9.6 Orion Rentals is unable to collect on a note worth $25,000 and has accumulated interest of $250. It
convert this note and interest to accounts receivable. After some time, Orion is still unable to collect the debt
and it decides to sell the converted note to a collection agency. The collection agency will pay only 20% of the
value of accounts receivable to Orion. What is the amount of cash paid to Orion from the collection agency?
A. $5,000
B. $5,050
C. $20,000
D. $19,950
Questions
1. 9.1 What is the matching principle?
2. 9.1 A beverage wholesale outlet sells beverages by the case. On April 13, a customer purchased 18 cases
of wine at $42 per case, 20 cases of soda at $29 per case, and 45 cases of water at $17 per case. The customer
pays with a Merill credit card. Merill charges a usage fee to the company of 5% of the total sale. What is the
sales entry for this purchase?
3. 9.1 On January 1, a flower shop contracts with customers to provide flowers for their wedding on June 2.
The total contract price is $3,000, payable in equal installments for the next six months on the first of each
month (with the first payment due January 1). How much will be recorded as revenue during the month of
April?
4. 9.1 American Signs allows customers to pay with their Jones credit card and cash. Jones charges
American Signs a 3.5% service fee for each credit sale using its card. Credit sales for the month of June total
$328,430, where 40% of those sales were made using the Jones credit card. Based on this information, what
will be the total in Credit Card Expense at the end of June?
5. 9.2 Which account type is used to record bad debt estimation and is a contra account to Accounts
Receivable?
6. 9.2 Earrings Depot records bad debt using the allowance, balance sheet method. They recorded $97,440
in accounts receivable for the year and $288,550 in credit sales. The uncollectible percentage is 5.5%. What is
the bad debt estimation for the year using the balance sheet method?
7. 9.2 Racing Adventures records bad debt using the allowance, income statement method. They recorded
$134,560 in accounts receivable for the year and $323,660 in credit sales. The uncollectible percentage is 6.8%.
What is the bad debt estimation for the year using the income statement method?
8. 9.2 Aron Larson is a customer of Bank Enterprises. Mr. Larson took out a loan in the amount of $120,000
on August 1. On December 31, Bank Enterprises determines the loan to be uncollectible. Larson had not paid
anything toward the balance due on account. What is the journal entry recording the bad debt write-off?
622 Chapter 9 Accounting for Receivables
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
9. 9.2 The following accounts receivable information pertains to Growth Markets LLC.
What is the total uncollectible estimated bad debt for Growth Markets LLC?
10. 9.2 What are bad debts?
11. 9.3 What are some possible negative signals when the product of the accounts receivable turnover ratio
is lower (i.e., fewer times)?
12. 9.3 Berry Farms has an accounts receivable balance at the end of 2018 of $425,650. The net credit sales
for the year are $924,123. The balance at the end of 2017 was $378,550. What is the number of days’ sales in
receivables ratio for 2018 (round all answers to two decimal places)?
13. 9.3 What are the two most common receivables ratios, and what do these ratios tell a stakeholder about
the company?
14. 9.4 What is the difference between earnings management and earnings manipulation?
15. 9.4 What is an earnings management benefit from showing a reduced figure for bad debt expense?
16. 9.4 Angelo’s Outlet used to report bad debt using the balance sheet method and is now switching to
the income statement method. The percentage uncollectible will remain constant at 5%. Credit sales figures
for 2019 were $866,000, and accounts receivable was $732,000. How much will Angelo’s Outlet report for 2019
bad debt estimation under the income statement method?
17. 9.4 What is an earnings management benefit from showing an increased figure for bad debt expense?
18. 9.5 What are the two methods of revenue recognition for long-term construction projects?
19. 9.5 What is the installment method?
20. 9.5 What is a possible ramification of deferred revenue reporting?
21. 9.5 What is the completed contract method?
22. 9.5 What is the percentage of completion method?
23. 9.6 British Imports is unable to collect on a note worth $215,000 that has accumulated interest of $465.
What is the journal entry to record the conversion of the note to accounts receivable?
24. 9.6 Chemical Enterprises issues a note in the amount of $156,000 to a customer on January 1, 2018.
Terms of the note show a maturity date of 36 months, and an annual interest rate of 8%. What is the
accumulated interest entry if 9 months have passed since note establishment?
25. 9.6 What is the principal of a note?
26. 9.6 A customer was unable to pay the accounts receivable on time in the amount of $34,000. The
customer was able to negotiate with the company and transferred the accounts receivable into a note that
includes interest, along with an up-front cash payment of $6,000. The note maturity date is 24 months with a
15% annual interest rate. What is the entry to recognize this transfer?
27. 9.6 What are three differences between accounts receivable and notes receivable?
Chapter 9 Accounting for Receivables 623
Exercise Set A
EA1. 9.1 Prepare journal entries for the following transactions from Restaurant Depot.
Nov. 8 Customer Miles Shandy purchased 200 pans at $35 per pan, costing Restaurant Depot $21 per
pan. Terms of the sale are 2/10, n/30, invoice dated November 8.
Nov. 17 Miles Shandy pays in full with cash for his purchase of November 8.
EA2. 9.1 Prepare journal entries for the following transactions from Cars Plus.
Oct. 18 Customer Angela Sosa purchased $132,980 worth of car parts with her Standard credit card. The
cost to Cars Plus for the sale is $86,250. Standard credit card charges Cars Plus a fee of 4% of the
sale.
Oct. 24 Standard remits payment to Cars Plus, less any fees.
EA3. 9.1 Consider the following transaction: On March 6, Fun Cards sells540 card decks with a sales price of
$7 per deck to Padma Singh. The cost to Fun Cards is $4 per deck. Prepare a journal entry under each of the
following conditions. Assume MoneyPlus charges a 2% fee for each sales transaction using its card.
A. Payment is made using a credit, in-house account.
B. Payment is made using a MoneyPlus credit card.
EA4. 9.2 Window World extended credit to customer Nile Jenkins in the amount of $130,900 for his
purchase of window treatments on April 2. Terms of the sale are 2/60, n/150. The cost of the purchase to
Window World is $56,200. On September 4, Window World determined that Nile Jenkins’s account was
uncollectible and wrote off the debt. On December 3, Mr. Jenkins unexpectedly paid in full on his account.
Record each Window World transaction with Nile Jenkins. In order to demonstrate the write-off and then
subsequent collection of an account receivable, assume in this example that Window World rarely extends
credit directly, so this transaction is permitted to use the direct write-off method. Remember, however, that in
most cases the direct write-off method is not allowed.
EA5. 9.2 Millennium Associates records bad debt using the allowance, income statement method. They
recorded $299,420 in accounts receivable for the year, and $773,270 in credit sales. The uncollectible
percentage is 3.2%. On February 5, Millennium Associates identifies one uncollectible account from Molar Corp
in the amount of $1,330. On April 15, Molar Corp unexpectedly pays its account in full. Record journal entries
for the following.
A. Year-end adjusting entry for 2017 bad debt
B. February 5, 2018 identification entry
C. Entry for payment on April 15, 2018
624 Chapter 9 Accounting for Receivables
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
EA6. 9.2 Millennium Associates records bad debt using the allowance, balance sheet method. They
recorded $299,420 in accounts receivable for the year, and $773,270 in credit sales. The uncollectible
percentage is 3.2%. On November 22, Millennium Associates identifies one uncollectible account from Angel’s
Hardware in the amount of $3,650. On December 18, Angel’s Hardware unexpectedly pays its account in full.
Record journal entries for the following.
A. Year-end adjusting entry for 2017 bad debt
B. November 22, 2018 identification entry
C. Entry for payment on December 18, 2018
EA7. 9.2 The following accounts receivable information pertains to Marshall Inc.
Determine the estimated uncollectible bad debt from Marshall Inc. using the balance sheet aging of
receivables method, and record the year-end adjusting journal entry for bad debt.
EA8. 9.3 Using the following select financial statement information from Black Water Industries, compute
the accounts receivable turnover ratios for 2018 and 2019 (round answers to two decimal places). What do the
outcomes tell a potential investor about Black Water Industries?
EA9. 9.3 Using the following select financial statement information from Black Water Industries, compute
the number of days’ sales in receivables ratios for 2018 and 2019 (round answers to two decimal places). What
do the outcomes tell a potential investor about Black Water Industries?
EA10. 9.3 Millennial Manufacturing has net credit sales for 2018 in the amount of $1,433,630, beginning
accounts receivable balance of $585,900, and an ending accounts receivable balance of $621,450. Compute the
accounts receivable turnover ratio and the number of days’ sales in receivables ratio for 2018 (round answers
to two decimal places). What do the outcomes tell a potential investor about Millennial Manufacturing if
industry average is 2.6 times and number of day’s sales ratio is 180 days?
Chapter 9 Accounting for Receivables 625
	Chapter 9. Accounting for Receivables
	Questions
	Exercise Set A