Chapter 13
Ex. 1
Prepare journal entries to record the following transactions entered into by the Castagno Company:
2012
Nov. 1
Sold merchandise on account to Mercer, Inc., for $16,000, terms 2/10, n/30.
Nov.
5
Mercer, Inc., returned merchandise worth $1,500.
Nov.
9
Received payment in full from Mercer, Inc.
Solution 1
2012
Nov. 1 Accounts Receivable—Mercer, Inc. ..................................
Sales ........................................................................
Nov.
Nov.
5
9
16,000
16,000
Sales Returns and Allowances ..........................................
Accounts Receivable—Mercer, Inc. ..........................
1,500
Cash ................................................................................
Sales Discounts ($14,500 × .02) .......................................
Accounts Receivable—Mercer, Inc. ..........................
14,210
290
1,500
14,500
Ex. 2
The ledger of the Ramirez Company at the end of the current year shows Accounts Receivable of $120,000.
(a) If Allowance for Doubtful Accounts has a credit balance of $2,000 in the trial balance and bad debts are
expected to be 6% of accounts receivable, journalize the adjusting entry for end of the period. (Show all
calculations.)
(b) If Allowance for Doubtful Accounts has a debit balance of $2,000 in the trial balance and bad debts are
expected to be 6% of accounts receivable, journalize the adjusting entry for end of the period. (Show all
calculations.)
Solution 2
(a) Bad Debts Expense ....................................................................
5,200
Allowance for Doubtful Accounts ($7,200 – $2,000)............
5,200
(To adjust the allowance account to total estimated uncollectible, $120,000 × .06 = $7,200)
(b) Bad Debts Expense ....................................................................
9,200
Allowance for Doubtful Accounts ($7,200 + $2,000)............
(To adjust the allowance account to total estimated uncollectible)
9,200
Ex. 3
Strickman Company uses the allowance method for estimating uncollectible accounts. Prepare journal entries to
record the following transactions:
January
5
Sold merchandise to Sue Land for $1,500, terms n/15.
April
15
Received $400 from Sue Land on account.
August
21
Wrote off as uncollectible the balance of the Sue Land account when she declared bankruptcy.
October
5
Unexpectedly received a check for $600 from Sue Land.
Solution 3
January 5 Accounts Receivable – S. Land .....................................
Sales .....................................................................
April
1,500
1,500
15 Cash ..............................................................................
Accounts Receivable—S. Land .............................
400
August 21 Allowance for Doubtful Accounts ....................................
Accounts Receivable—S. Land .............................
1,100
October 5 Accounts Receivable—S. Land ......................................
Allowance for Doubtful Accounts ...........................
600
Cash ..............................................................................
Accounts Receivable—S. Land .............................
600
400
1,100
600
Ex. 4
Compute the maturity value as indicated for each of the following notes receivable.
1. A $8,000, 7%, 3-month note dated July 20.
Maturity value $____________.
2. A $15,000, 8%, 150-day note dated August 5.
Maturity value $____________.
Solution 4
1. Maturity value: $5,075
$8,000 × 7% × 3 ÷ 12 + $8,000 = $140 + $8,000 = $8,140
2. Maturity value: $11,198
$15,000 × 8% × 150 ÷ 360 + $15,000 = $500 + $15,000 = $15,500
600
Ex. 5
The following data exists for Mather Company.
Accounts Receivable
Net Sales
$
2012
75,000
465,000
$
2011
85,000
420,000
Calculate the receivable turnover ratio and the average collection period for accounts receivable in days for 2012.
Solution 5
Receivable turnover ratio =
$465,000
($75,000 + $85,000)/2
= 5.8 times
Average collection period =
365 days
5.8
= 62.9 days