CHAPTER 9
RECEIVABLES
PRACTICE EXERCISES
PE 9–2A
Sept. 19 Cash....................................................................
Allowance for Doubtful Accounts ....................
Accounts Receivable—Pat Roark ...............
100
500
Dec.
20 Accounts Receivable—Pat Roark ....................
Allowance for Doubtful Accounts ...............
500
20 Cash....................................................................
Accounts Receivable—Pat Roark ...............
500
600
500
500
PE 9–4A
1.
$26,250 ($24,000 + $2,250)
2.
Accounts Receivable.....................................................
Allowance for Doubtful Accounts ................................
Bad Debt Expense .........................................................
3.
Net realizable value ($1,400,000 – $24,000) .................
Adjusted Balance
$1,400,000
24,000
26,250
$1,376,000
PE 9–5A
1.
The due date for the note is July 11, determined as follows:
March ................................................................
18 days (31 – 13)
April ..................................................................
30 days
May ...................................................................
31 days
June ..................................................................
30 days
July ...................................................................
11 days
Total ..............................................................
120 days
2.
$206,000 [$200,000 + ($200,000 × 9% × 120/360)]
3.
July 11 Cash .................................................................
Notes Receivable .......................................
Interest Revenue........................................
206,000
200,000
6,000
EXERCISES
Ex. 9–8
a.
Customer
Cottonwood Industries
Fargo Company
Garfield Inc.
Sadler Company
Twitty Company
Due Date
July 6
September 17
October 17
November 2
December 23
Number of Days Past Due
147 days (25 + 31 + 30 + 31 + 30)
74 days (13 + 31 + 30)
44 days (14 + 30)
28 days
Not past due
b.
A
1
2
3
4
5
6
Customer
Abbott Brothers Inc.
Alonso Company
21
22
23
24
25
26
27
28
Ziel Company
Subtotals
Cottonwood Industries
Fargo Company
Garfield Inc.
Sadler Company
Twitty Company
Totals
B
C
D
E
F
Aging-of-Receivables Schedule
November 30
Days Past Due
Not Past
Balance
Due
1–30
31–60
61–90
2,000
2,000
1,500
1,500
5,000
807,500
14,300
17,700
8,500
10,000
25,000
883,000
475,000 180,000
5,000
78,500
42,300
G
Over
90
31,700
14,300
17,700
8,500
10,000
25,000
500,000 190,000
87,000
60,000
46,000
Ex. 9–9
Days Past Due
Total receivables
Percentage
uncollectible
Allowance for
Doubtful Accounts
Balance
Not Past
Due
1–30
883,000
500,000
77,800
31–60
61–90
Over
90
190,000
87,000
60,000
46,000
1%
6%
20%
35%
50%
5,000
11,400
17,400
21,000
23,000
Ex. 9–10
Nov.
30 Bad Debt Expense .............................................
Allowance for Doubtful Accounts ...............
Uncollectible accounts estimate.
($77,800 – $16,175)
61,625
61,625
Ex. 9–25
1.
The interest receivable should be reported separately as a current asset. It
should not be deducted from notes receivable.
2.
The allowance for doubtful accounts should be deducted from accounts receivable.
A corrected partial balance sheet would be as follows:
JENNETT COMPANY
Balance Sheet
December 31, 2010
Assets
Current assets:
Cash ............................................................................
Notes receivable ........................................................
Accounts receivable ..................................................
Less allowance for doubtful accounts ...............
Interest receivable .....................................................
$ 95,000
250,000
$398,000
36,000
362,000
15,000
Appendix Ex. 9–26
a.
$61,800 [$60,000 + ($60,000 × 9% × 120/360)]
b. 60 days [120 – (24 + 30 + 6)]
c.
$1,236 ($61,800 × 12% × 60/360)
d. $60,564 ($61,800 – $1,236)
e. Cash ............................................................................
Interest Revenue...................................................
Notes Receivable ..................................................
60,564
564
60,000
Appendix Ex. 9–27
Mar.
1
31
Notes Receivable ..................................................
Accounts Receivable—Gymboree Company
40,000
Cash.......................................................................
Notes Receivable ............................................
Interest Revenue .............................................
40,120*
*Computations
Maturity value
$40,000 + ($40,000 × 8% × 90/360) .................
Discount ($40,800 × 10% × 60/360) ....................
Proceeds ..............................................................
May 30
Accounts Receivable—Gymboree Company .....
Cash .................................................................
40,000
40,000
120
$40,800
680
$40,120
41,000*
41,000
*$40,800 + $200
June 29
Cash.......................................................................
Accounts Receivable—Gymboree Company
Interest Revenue .............................................
*$41,000 + ($41,000 × 0.12 × 30/360) = $41,410
41,410*
41,000
410
Ex. 9–28
a. and b.
Net sales
Accounts receivable
Average accounts receivable
Accounts receivable turnover
Average daily sales
Days’ sales in receivables
c.
2007
$4,295,400
$511,900
$514,250
8.4
$11,768.2
43.7
2006
$3,746,300
$516,600
[($511,900 + $516,600)/2] $523,551.5
($4,295,400/$514,250)
7.2
($4,295,400/365)
10,263.8
($514,250/$11,768.2)
51.0
[($516,600 + $530,503)/2]
($3,746,300/$523,551.5)
($3,746,300/365)
($523,551.5/$10,263.8)
The accounts receivable turnover indicates an increase in the efficiency of collecting accounts receivable by
increasing from 7.2 to 8.4, a favorable trend. The days’ sales in receivables also indicates an increase in the
efficiency of collecting accounts receivable by decreasing from 51.0 to 43.7, also indicating a favorable trend.
Before reaching a definitive conclusion, the ratios should be compared with industry averages and similar
firms.