Study Guide 14 Name Part One Identifying Accounting Terms Identifying Accounting Terms Analyzing Accounts Receivable and Notes Receivable Journalizing Accounts Receivable and Notes Receivable Transactions Directions: Select the one term in Column I that best fits each definition in Column II. Print the letter identifying your choice in the Answers column. Total Perfect Score 22 Pts. 20 Pts. 21 Pts. 63 Pts. Your Score Column I A. aging of accounts receivable B. allowance method Column II 1. Accounts receivable that cannot be collected. (p. 412) 2. Crediting the estimated value of uncollectible accounts to a contra account. (p. 412) Answers 1. U 2. B C. book value 3. The difference between an asset s account balance and its related contra account balance. (p. 412) 3. C D. book value of accounts receivable 4. The difference between the balance of Accounts Receivable and its contra account, Allowance for Uncollectible Accounts. (p. 412) 4. D E. direct write-off method 5. The amount of accounts receivable a business expects to collect. (p. 412) 5. L F. dishonored note 6. A method used to estimate uncollectible accounts receivable that assumes a percent of credit sales will become uncollectible. (p. 413) 6. Q G. interest income 7. A method used to estimate uncollectible accounts receivable that uses an analysis of accounts receivable to estimate the amount that will be uncollectible. (p. 413) 7. P H. interest rate 8. Analyzing accounts receivable according to when they are due. (p. 414) 8. A I. maker of a note 9. Canceling the balance of a customer account because the customer does not pay. (p. 418) 9. V J. maturity date 10. Recording uncollectible accounts expense only when an amount is actually known to be uncollectible. (p. 419) 10. E K. maturity value 11. A written and signed promise to pay a sum of money at a specified time. (p. 425) 11. S L. net realizable value 12. A promissory note signed by a business and given to a creditor. (p. 425) 12. M M. note payable 13. A promissory note that a business accepts from a person or business. (p. 425) 13. N N. note receivable 14. The person or business that signs a note, and thus promises to make payment. (p. 425) 14. I O. payee 15. The person or business to whom the amount of a note is payable. (p. 425) 15. O Chapter 14 Accounting for Uncollectible Accounts Receivable 391
P. percent of accounts receivable method Q. percent of sales method R. principal Column I S. promissory note T. time of a note U. uncollectible accounts V. writing off an account Column II 16. The original amount of a note, sometimes referred to as the face amount. (p. 425) 17. The percentage of the principal that is due for the use of the funds secured by a note. (p. 425) 18. The date on which the principal of a note is due to be repaid. (p. 425) 19. The length of time from the signing date of a note to the maturity date. (p. 425) 20. The amount that is due on the maturity date of a note. (p. 427) 21. The interest earned on money loaned. (p. 428) 22. A note that is not paid when due. (p. 429) Answers 16. R 17. H 18. J 19. T 20. K 21. G 22. F 392 Working Papers TE
Part Two Analyzing Accounts Receivable and Notes Receivable Directions: Place a T for True or an F for False in the Answers column to show whether each of the following statements is true or false. 1. The expense of an uncollectible account should be recorded in the accounting period that the account becomes uncollectible. (p. 412) 2. The account, Allowance for Uncollectible Accounts, has a normal credit balance. (p. 412) Answers 1. F 2. T 3. A business usually knows at the end of the fiscal year which customer accounts will become uncollectible. (p. 412) 4. The account, Allowance for Uncollectible Accounts, is reported on the income statement. (p. 412) 5. The book value of accounts receivable must be a reasonable and unbiased estimate of the money the business expects to collect in the future. (p. 413) 6. The percent of sales method of estimating uncollectible accounts expense assumes that a portion of every dollar of sales on account will become uncollectible. (p. 413) 7. The accounting concept, Conservatism, is applied when the process of making accounting estimates is free from bias. (p. 413) 8. The percent of each age group of an accounts receivable aging that is expected to become uncollectible is determined by the Securities and Exchange Commission. (p. 414) 9. The adjusting entry for uncollectible accounts does not affect the balance of the Accounts Receivable account. (p. 415) 10. A business having a $300.00 credit balance in Allowance for Uncollectible Accounts and estimating its uncollectible accounts to be $4,000.00 would record a $4,300.00 credit to Allowance for Uncollectible Accounts. (p. 415) 11. When an account is written off as uncollectible, the business sends the customer a credit memo. (p. 418) 12. When a customer account is written off under the allowance method, book value of accounts receivable decreases. (p. 418) 13. The direct write-off method of accounting for uncollectible accounts does not comply with GAAP. (p. 419) 14. When a previously written-off account is collected, Accounts Receivable is both debited and credited for the amount collected. (pp. 421 422) 15. A note provides the business with legal evidence of the debt should it be necessary to go to court to collect. (p. 425) 16. Total assets are reduced when a business accepts a note receivable from a customer needing an extension of time to pay an account receivable. (p. 426) 17. Interest rates are stated as a percentage of the principal. (p. 427) 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. 17. F F T T F F T F F F T T T F T 18. Interest income is classified as an Other Revenue account. (p. 428) 18. T 19. The method for calculating interest is the same for notes payable and notes receivable. (p. 428) 19. T 20. Interest income should not be recorded on a dishonored note receivable. (p. 429) 20. F Chapter 14 Accounting for Uncollectible Accounts Receivable 393
Part Three Journalizing Accounts Receivable and Notes Receivable Transactions Directions: In Answers Column l, print the abbreviation for the journal in which each transaction is to be recorded. In Answers Columns 2 and 3, print the letters identifying the accounts to be debited and credited for each transaction. G General journal CR Cash receipts journal Answers 1 2 3 Account Titles Transactions Journal Debit Credit A. Accounts Receivable 1-2-3. Recorded adjusting entry for uncollectible accounts expense. (p. 415) 1. G 2. G 3. B B. Allowance for Uncollectible Accounts 4-5-6. Wrote off Sanderson Company s past-due account as uncollectible. (p. 418) 4. G 5. B 6. A, F C. Cash Received cash in full payment of Sanderson Company s account, previously written off as uncollectible. (Record two entries, 7-8-9 and 10-11-12, below.) D. Interest Income 7-8-9. First entry. (p. 421) 7. G 8. A, F 9. B E. Notes Receivable 10-11-12. Second entry. (p. 422) 10. CR 11. C 12. A, F F. Sanderson Company 13-14-15. Accepted a note from Sanderson Company for an extension of time on its account. (p. 426) 13. G 14. E 15. A, F G. Uncollectible Accounts Expense 16-17-18. Collected a note receivable from Sanderson Company. (p. 428) 16. CR 17. C 18. E, D H. Williams Supply 19-20-21. Williams Supply dishonored a note receivable. (p. 429) 19. G 20. A, H 21. E, D 394 Working Papers TE
Name Date Class 14-1 WORK TOGETHER, p. 417 Journalizing the adjusting entry for Allowance for Uncollectible Accounts 1. Age Group Amount Percent Uncollectible Current $16,485.18 2.0% 1 30 12,489.05 4.0% 31 60 6,958.18 8.0% 61 90 4,218.21 20.0% Over 90 3,157.10 70.0% $43,307.72 $ 329.70 499.56 556.65 843.64 2,209.97 $4,439.52 Current Balance of Allowance for Uncollectible Accounts Estimated Addition to Allowance for Uncollectible Accounts 236.89 $4,202.63 2. ACCOUNT TITLE Adjusting Entries GENERAL JOURNAL PAGE 13 1 1 2 2 Dec. 31 Uncollectible Accounts Expense 4 2 0 2 63 Allowance for Uncollectible Accounts 4 2 0 2 63 3 3 4 4 Chapter 14 Accounting for Uncollectible Accounts Receivable 395
14-1 ON YOUR OWN, p. 417 Journalizing the adjusting entry for Allowance for Uncollectible Accounts 1. Age Group Amount Percent Uncollectible Current $25,114.16 1.0% 1 30 32,458.15 2.5% 31 60 12,489.58 7.5% 61 90 6,154.25 30.0% Over 90 7,189.28 80.0% $83,405.42 $ 251.14 811.45 936.72 1,846.28 5,751.42 $9,597.01 Current Balance of Allowance for Uncollectible Accounts Estimated Addition to Allowance for Uncollectible Accounts 1,841.63 $7,755.38 2. ACCOUNT TITLE Adjusting Entries GENERAL JOURNAL PAGE 13 1 1 2 2 Dec. 31 Uncollectible Accounts Expense 7 7 5 5 38 Allowance for Uncollectible Accounts 7 7 5 5 38 3 3 4 4 396 Working Papers TE
Name Date Class 14-2 WORK TOGETHER, p. 424 Recording entries related to uncollectible accounts receivable 1., 2. ACCOUNT TITLE GENERAL JOURNAL PAGE 15 1 1 Nov. 4 Allowance for Uncollectible Accounts M145 1135 4 9 4 00 1130 Accounts Receivable/Mellon Corp. 130 4 9 4 00 15 Allowance for Uncollectible Accounts M147 1135 1 5 4 8 00 1130 Accounts Receivable/Horne Co. 120 1 5 4 8 00 Dec. 8 Accounts Receivable/Mellon Corp. M158 1130 130 4 9 4 00 Allowance for Uncollectible Accounts 1135 4 9 4 00 14 Allowance for Uncollectible Accounts M161 1135 1 3 6 0 00 1130 Accounts Receivable/Fischer Industries 110 1 3 6 0 00 16 Accounts Receivable/Horne Co. M169 1130 120 1 5 4 8 00 Allowance for Uncollectible Accounts 1135 1 5 4 8 00 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 1. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Fisher Industries CUSTOMER 110 Nov. 1 Balance 1 3 6 0 00 Dec. 14 Written off G15 1 3 6 0 00 Chapter 14 Accounting for Uncollectible Accounts Receivable 397
14-2 WORK TOGETHER (continued) ACCOUNT Horne Co. CUSTOMER 120 Nov. 1 Balance 1 5 4 8 00 15 Written off G15 1 5 4 8 00 Dec. 16 Reopen account G15 1 5 4 8 00 1 5 4 8 00 16 CR24 1 5 4 8 00 ACCOUNT Mellon Corp. CUSTOMER 130 Nov. 1 Balance 4 9 4 00 4 Written off G15 4 9 4 00 Dec. 8 Reopen account G15 4 9 4 00 4 9 4 00 8 CR24 4 9 4 00 2. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 Nov. 1 Balance 35 1 4 8 85 4 G15 4 9 4 00 34 6 5 4 85 15 G15 1 5 4 8 00 33 1 0 6 85 Dec. 8 G15 4 9 4 00 33 6 0 0 85 14 G15 1 3 6 0 00 32 2 4 0 85 16 G15 1 5 4 8 00 33 7 8 8 85 ACCOUNT Allowance for Uncollectible Accounts ACCOUNT 1135 Nov. 1 Balance 3 1 5 8 47 4 G15 4 9 4 00 2 6 6 4 47 15 G15 1 5 4 8 00 1 1 1 6 47 Dec. 8 G15 4 9 4 00 1 6 1 0 47 14 G15 1 3 6 0 00 2 5 0 47 16 G15 1 5 4 8 00 1 7 9 8 47 398 Working Papers TE
Name Date Class 14-2 WORK TOGETHER (concluded) 1., 2. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 24 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE Dec. 8 Mellon Corp. R341 130 4 9 4 00 4 9 4 00 1 1 16 Horne Co. R349 120 1 5 4 8 00 1 5 4 8 00 2 2 SALES DISCOUNT CASH 3 3 Chapter 14 Accounting for Uncollectible Accounts Receivable 399
14-2 ON YOUR OWN, p. 424 Recording entries related to uncollectible accounts receivable 1., 2. GENERAL JOURNAL PAGE 10 ACCOUNT TITLE 1 1 Oct. 5 Allowance for Uncollectible Accounts M145 1135 5 2 7 00 1130 Accounts Receivable/Janice Harrell 120 5 2 7 00 26 Allowance for Uncollectible Accounts M147 1135 2 4 9 00 1130 Accounts Receivable/Daniel Pruitt 130 2 4 9 00 Nov. 12 Accounts Receivable/Tom Sloan M151 1130 140 7 5 0 00 Allowance for Uncollectible Accounts 1135 7 5 0 00 16 Allowance for Uncollectible Accounts M158 1135 4 2 8 00 1130 Accounts Receivable/Nancy Brown 110 4 2 8 00 23 Accounts Receivable/Janice Harrell M161 1130 120 5 2 7 00 Allowance for Uncollectible Accounts 1135 5 2 7 00 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 1. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Nancy Brown CUSTOMER 110 Oct. 1 Balance 4 2 8 00 Nov. 16 Written off G10 4 2 8 00 ACCOUNT Janice Harrell CUSTOMER 120 Oct. 1 Balance 5 2 7 00 5 Written off G10 5 2 7 00 Nov. 23 Reopen account G10 5 2 7 00 5 2 7 00 23 CR22 5 2 7 00 400 Working Papers TE
Name Date Class 14-2 ON YOUR OWN (continued) ACCOUNT Daniel Pruitt CUSTOMER 130 Oct. 1 Balance 2 4 9 00 26 Written off G10 2 4 9 00 ACCOUNT Tom Sloan CUSTOMER 140 Nov. 12 Reopen account G10 7 5 0 00 7 5 0 00 12 CR22 7 5 0 00 2. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 Oct. 1 Balance 19 4 8 2 58 5 G10 5 2 7 00 18 9 5 5 58 26 G10 2 4 9 00 18 7 0 6 58 Nov. 12 G10 7 5 0 00 19 4 5 6 58 16 G10 4 2 8 00 19 0 2 8 58 23 G10 5 2 7 00 19 5 5 5 58 ACCOUNT Allowance for Uncollectible Accounts ACCOUNT 1135 Oct. 1 Balance 3 6 5 8 97 5 G10 5 2 7 00 3 1 3 1 97 26 G10 2 4 9 00 2 8 8 2 97 Nov. 12 G10 7 5 0 00 3 6 3 2 97 16 G10 4 2 8 00 3 2 0 4 97 23 G10 5 2 7 00 3 7 3 1 97 Chapter 14 Accounting for Uncollectible Accounts Receivable 401
14-2 ON YOUR OWN (concluded) 1., 2. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 22 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE Nov. 12 Tom Sloan R213 140 7 5 0 00 7 5 0 00 1 1 23 Janice Harrell R225 120 5 2 7 00 5 2 7 00 2 2 SALES DISCOUNT CASH 3 3 402 Working Papers TE
Name Date Class 14-3 WORK TOGETHER, p. 430 Recording notes receivable 1. Note Date Principal Interest Rate NR3 June 5 $20,000.00 8% 90 NR4 June 12 $10,000.00 6% 120 Time in Days Interest Maturity Date Maturity Value $400.00 September 3 $20,400.00 $200.00 October 10 $10,200.00 Calculations: Note Maturity Date Interest Maturity Value NR3 Days from the Month Days Remaining Term of the Note 90 June 5 30 25 65 July 31 34 August 31 3 September 1 3 3 0 $20,000.00 8% 90/360 = $400.00 $20,000.00 + $400.00 = $20,400.00 NR4 Days from the Month Days Remaining Term of the Note 120 June 12 30 18 102 July 31 71 August 31 40 September 30 10 October 1 10 10 0 $10,000.00 6% 120/360 = $200.00 $10,000.00 + $200.00 = $10,200.00 Chapter 14 Accounting for Uncollectible Accounts Receivable 403
14-3 WORK TOGETHER (continued) 2., 3. GENERAL JOURNAL PAGE 7 ACCOUNT TITLE 5 Notes Receivable 1 8 0 0 00 NR5 1170 1 8 0 0 00 Accounts Receivable/Gary Kinney 1130 120 4 4 5 5 26 Accounts Receivable/Dennis Craft M25 1130 110 4 0 9 00 6 6 Notes Receivable 1170 4 0 0 00 7 7 Interest Income 7110 9 00 8 8 9 9 2., 3. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 8 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE SALES DISCOUNT CASH 12 Notes Receivable R113 1170 5 0 0 00 5 0 7 50 13 13 Interest Income 7110 7 50 14 14 15 15 404 Working Papers TE
Name Date Class 14-3 WORK TOGETHER (concluded) 2., 3. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Dennis Craft customer 110 July 26 Dishonored note G7 4 0 9 00 4 0 9 00 ACCOUNT Gary Kinney customer 120 July 1 Balance 1 8 0 0 00 5 Accepted note G7 1 8 0 0 00 3. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 July 1 Balance 42 1 8 1 97 5 G7 1 8 0 0 00 40 3 8 1 97 26 G7 4 0 9 00 40 7 9 0 97 ACCOUNT Notes Receivable ACCOUNT 1170 July 1 Balance 16 2 0 0 00 5 G7 1 8 0 0 00 18 0 0 0 00 12 CR8 5 0 0 00 17 5 0 0 00 26 G7 4 0 0 00 17 1 0 0 00 ACCOUNT Interest Income ACCOUNT 7110 July 1 Balance 4 5 8 00 12 CR8 7 50 4 6 5 50 26 G7 9 00 4 7 4 50 Chapter 14 Accounting for Uncollectible Accounts Receivable 405
14-3 ON YOUR OWN, p. 430 Recording notes receivable 1. Note Date Principal Interest Rate NR12 March 22 $8,000.00 6% 120 NR13 April 7 $6,000.00 7% 90 Time in Days Interest Maturity Date Maturity Value $160.00 July 20 $8,160.00 $105.00 July 6 $6,105.00 Calculations: Note Maturity Date Interest Maturity Value NR12 Days from the Month Days Remaining Term of the Note 120 March 22 31 9 111 April 30 81 May 31 50 June 30 20 July 1 20 20 0 $8,000.00 6% 120/360 = $160.00 $8,000.00 + $160.00 = $8,160.00 NR13 Days from the Month Days Remaining Term of the Note 90 April 7 30 23 67 May 31 36 June 30 6 July 1 6 6 0 $6,000.00 7% 90/360 = $105.00 $6,000.00 + $105.00 = $6,105.00 406 Working Papers TE
Name Date Class 14-3 ON YOUR OWN (continued) 2., 3. GENERAL JOURNAL PAGE 15 ACCOUNT TITLE 8 Notes Receivable 3 2 0 0 00 NR14 1170 3 2 0 0 00 Accounts Receivable/Marshall Sykes 1130 120 7 7 8 8 21 Accounts Receivable/Roger Hamm M46 1130 110 2 8 5 6 00 9 9 Notes Receivable 1170 2 8 0 0 00 10 10 Interest Income 7110 5 6 00 11 11 12 12 2., 3. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 20 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE SALES DISCOUNT CASH 16 Notes Receivable R243 1170 6 0 0 0 00 6 1 2 0 00 19 19 Interest Income 7110 1 2 0 00 20 20 21 21 Chapter 14 Accounting for Uncollectible Accounts Receivable 407
14-3 ON YOUR OWN (concluded) 2., 3. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Roger Hamm customer 110 May 21 Dishonored note G15 2 8 5 6 00 2 8 5 6 00 ACCOUNT Marshall Sykes customer 120 May 1 Balance 3 2 0 0 00 8 Accepted note G15 3 2 0 0 00 3. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 May 1 Balance 56 1 8 4 50 8 G15 3 2 0 0 00 52 9 8 4 50 21 G15 2 8 5 6 00 55 8 4 0 50 ACCOUNT Notes Receivable ACCOUNT 1170 May 1 Balance 14 3 0 0 00 8 G15 3 2 0 0 00 17 5 0 0 00 16 CR20 6 0 0 0 00 11 5 0 0 00 21 G15 2 8 0 0 00 8 7 0 0 00 ACCOUNT Interest Income ACCOUNT 7110 May 1 Balance 6 4 8 00 16 CR20 1 2 0 00 7 6 8 00 21 G15 5 6 00 8 2 4 00 408 Working Papers TE
Name Date Class 14-1 APPLICATION PROBLEM (LO2, 3), p. 434 Journalizing the adjusting entry for Allowance for Uncollectible Accounts 1. Age Group Amount Percent Uncollectible Current $20,489.15 2.0% 1 30 16,487.20 6.0% 31 60 8,415.29 15.0% 61 90 6,218.47 50.0% Over 90 2,584.95 90.0% $54,195.06 $ 409.78 989.23 1,262.29 3,109.24 2,326.46 $8,097.00 Current Balance of Allowance for Uncollectible Accounts Estimated Addition to Allowance for Uncollectible Accounts 548.97 $7,548.03 2. General JOURNAL PAGE 13 ACCOUNT TITLE Adjusting Entries 1 1 2 2 Dec. 31 Uncollectible Accounts Expense 7 5 4 8 03 Allowance for Uncollectible Accounts 7 5 4 8 03 3 3 4 4 Chapter 14 Accounting for Uncollectible Accounts Receivable 409
14-2 APPLICATION PROBLEM (LO4, 5), p. 434 Recording entries related to uncollectible accounts receivable 1., 2. General JOURNAL PAGE 6 ACCOUNT TITLE 1 1 May 6 Allowance for Uncollectible Accounts M89 1135 1 6 4 8 11 1130 Accounts Receivable/Suarez Consulting 140 1 6 4 8 11 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 14 Allowance for Uncollectible Accounts M92 1135 9 4 8 50 1130 Accounts Receivable/Durham Supply 110 9 4 8 50 23 Accounts Receivable/Foley Corp. M98 1130 120 1 1 0 9 80 Allowance for Uncollectible Accounts 1135 1 1 0 9 80 June 7 Allowance for Uncollectible Accounts M104 1135 4 8 8 93 1130 Accounts Receivable/Pennington Co. 130 4 8 8 93 29 Accounts Receivable/Suarez Consulting M109 1130 140 1 6 4 8 11 Allowance for Uncollectible Accounts 1135 1 6 4 8 11 12 12 1., 2. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Durham Supply customer 110 May 1 Balance 9 4 8 50 14 Written off G6 9 4 8 50 ACCOUNT Foley Corp. customer 120 May 23 Reopen account G6 1 1 0 9 80 1 1 0 9 80 23 CR11 1 1 0 9 80 410 Working Papers TE
Name Date Class 14-2 APPLICATION PROBLEM (continued) ACCOUNT Pennington Co. customer 130 May 1 Balance 4 8 8 93 June 7 Written off G6 4 8 8 93 ACCOUNT Suarez Consulting customer 140 May 1 Balance 1 6 4 8 11 6 Written off G6 1 6 4 8 11 June 29 Reopen account G6 1 6 4 8 11 1 6 4 8 11 29 CR11 1 6 4 8 11 2. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 May 1 Balance 19 4 8 2 58 6 G6 1 6 4 8 11 17 8 3 4 47 14 G6 9 4 8 50 16 8 8 5 97 June 23 G6 1 1 0 9 80 17 9 9 5 77 7 G6 4 8 8 93 17 5 0 6 84 29 G6 1 6 4 8 11 19 1 5 4 95 ACCOUNT Allowance for Uncollectible Accounts ACCOUNT 1135 May 1 Balance 3 4 5 0 00 6 G6 1 6 4 8 11 1 8 0 1 89 14 G6 9 4 8 50 8 5 3 39 June 23 G6 1 1 0 9 80 1 9 6 3 19 7 G6 4 8 8 93 1 4 7 4 26 29 G6 1 6 4 8 11 3 1 2 2 37 Chapter 14 Accounting for Uncollectible Accounts Receivable 411
14-2 APPLICATION PROBLEM (concluded) 1., 2. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 11 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE May 23 Foley Corp. R334 120 1 1 0 9 80 1 1 0 9 80 1 1 June 29 Suarez Consulting R356 140 1 6 4 8 11 1 6 4 8 11 2 2 SALES DISCOUNT CASH 3 3 412 Working Papers TE
Name Date Class 14-3 APPLICATION PROBLEM (LO6, 7, 8), p. 435 Recording notes receivable 1. Note Date Principal Interest Rate NR8 April 16 $25,000.00 8% 90 NR9 May 3 $ 8,000.00 9% 180 Time in Days Interest Maturity Date Maturity Value $500.00 July 15 $25,500.00 $360.00 October 30 $ 8,360.00 Calculations: 1. Note Maturity Date Interest Maturity Value NR8 Days from the Month Days Remaining Term of the Note 90 April 16 30 14 76 May 31 45 June 30 15 July 1 15 15 0 $25,000.00 8% 90/360 = $500.00 $25,000.00 + $500.00 = $25,500.00 NR9 Days from the Month Days Remaining Term of the Note 180 May 3 31 28 152 June 30 122 July 31 91 August 31 60 September 30 30 October 1 30 30 0 $8,000.00 9% 180/360 = $360.00 $8,000.00 + $360.00 = $8,360.00 Chapter 14 Accounting for Uncollectible Accounts Receivable 413
14-3 APPLICATION PROBLEM (continued) 2. GENERAL JOURNAL PAGE 16 ACCOUNT TITLE 3 Notes Receivable 6 8 0 0 00 NR10 1170 6 8 0 0 00 Accounts Receivable/Daniel Burris 1130 110 10 10 11 11 18 Accounts Receivable/Maggie Singer M240 1130 120 3 8 7 6 00 12 12 Notes Receivable 1170 3 8 0 0 00 13 13 Interest Income 7110 7 6 00 14 14 15 15 2. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 23 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE SALES DISCOUNT CASH 12 Notes Receivable R204 1170 2 0 0 0 00 2 0 4 0 00 22 22 Interest Income 7110 4 0 00 23 23 24 24 414 Working Papers TE
Name Date Class 14-3 APPLICATION PROBLEM (concluded) 2., 3. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Daniel Burris customer 110 June 1 Balance 6 8 0 0 00 3 Accepted note G16 6 8 0 0 00 ACCOUNT Maggie Singer customer 120 June 18 Dishonored note G16 3 8 7 6 00 3 8 7 6 00 3. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 June 1 Balance 64 0 8 1 13 3 G16 6 8 0 0 00 57 2 8 1 13 18 G16 3 8 7 6 00 61 1 5 7 13 ACCOUNT Notes Receivable ACCOUNT 1170 June 1 Balance 12 8 5 0 00 3 G16 6 8 0 0 00 19 6 5 0 00 12 CR23 2 0 0 0 00 17 6 5 0 00 18 G16 3 8 0 0 00 13 8 5 0 00 ACCOUNT Interest Income ACCOUNT 7110 June 1 Balance 8 2 9 00 12 CR23 4 0 00 8 6 9 00 18 G16 7 6 00 9 4 5 00 Chapter 14 Accounting for Uncollectible Accounts Receivable 415
14-M MASTERY PROBLEM (LO4, 5, 6, 7, 8), p. 435 Recording entries for uncollectible accounts 1., 2. General JOURNAL PAGE 12 ACCOUNT TITLE 1 1 Dec. 3 Allowance for Uncollectible Accounts M243 1135 4 9 8 25 1130 Accounts Receivable/Patel Corporation 150 4 9 8 25 2 2 6 Accounts Receivable/Banda Company M244 1130 110 1 5 4 8 25 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 Allowance for Uncollectible Accounts 1135 1 5 4 8 25 10 Accounts Receivable/Broyles Industries M245 1130 120 4 8 9 6 00 Notes Receivable 1170 4 8 0 0 00 Interest Income 7110 9 6 00 14 Allowance for Uncollectible Accounts M246 1135 1 6 4 5 00 1130 Accounts Receivable/Murrell, Inc. 140 1 6 4 5 00 18 Notes Receivable NR10 1170 4 5 0 0 00 1130 Accounts Receivable/Maples Corporation 130 4 5 0 0 00 13 13 14 14 15 15 16 16 3. General JOURNAL PAGE 13 ACCOUNT TITLE Adjusting Entries 1 1 2 2 Dec. 31 Uncollectible Accounts Expense 6165 10 2 1 6 38 3 3 4 4 Allowance for Uncollectible Accounts 1135 10 2 1 6 38 5 5 416 Working Papers TE
Name Date Class 14-M MASTERY PROBLEM (continued) 1., 2. ACCOUNT TITLE CASH RECEIPTS JOURNAL PAGE 22 1 2 3 4 5 6 7 GENERAL ACCOUNTS RECEIVABLE SALES SALES TAX PAYABLE SALES DISCOUNT CASH Dec. 4 Notes Receivable R889 1170 5 0 0 0 00 5 1 0 0 00 1 1 Interest Income 7110 1 0 0 00 2 2 6 Banda Company R890 110 1 5 4 8 25 1 5 4 8 25 3 3 21 Notes Receivable R891 1170 4 0 0 0 00 4 1 2 0 00 4 4 Interest Income 7110 1 2 0 00 5 5 31 Totals 9 2 2 0 00 1 5 4 8 25 10 7 6 8 25 6 6 7 7 (1130) 3. Age Group Amount Percent Uncollectible Current $ 52,271.96 1.0% 1 30 32,581.28 2.5% 31 60 12,849.15 7.5% 61 90 9,418.25 25.0% Over 90 11,848.15 60.0% $118,968.79 $ 522.72 814.53 963.69 2,354.56 7,108.89 $11,764.39 Current Balance of Allowance for Uncollectible Accounts 1,548.01 Estimated Addition to Allowance for Uncollectible Accounts $10,216.38 Chapter 14 Accounting for Uncollectible Accounts Receivable 417
14-M MASTERY PROBLEM (continued) 1., 2., 3. ACCOUNTS RECEIVABLE LEDGER ACCOUNT Banda Company customer 110 Dec. 6 Reopen account G12 1 5 4 8 25 1 5 4 8 25 6 CR24 1 5 4 8 25 ACCOUNT Broyles Industries customer 120 Dec. 10 Dishonored note G12 4 8 9 6 00 4 8 9 6 00 ACCOUNT Maples Corporation customer 130 Dec. 1 Balance 4 5 0 0 00 18 Accepted note G12 4 5 0 0 00 ACCOUNT Murrell, Inc. customer 140 Dec. 1 Balance 1 6 4 5 00 14 Written off G12 1 6 4 5 00 ACCOUNT Patel Corporation customer 150 Dec. 1 Balance 4 9 8 25 3 Written off G12 4 9 8 25 418 Working Papers TE
Name Date Class 14-M MASTERY PROBLEM (concluded) 3. GENERAL LEDGER ACCOUNT Accounts Receivable ACCOUNT 1130 Dec. 1 Balance 120 7 1 6 04 3 G12 4 9 8 25 120 2 1 7 79 6 G12 1 5 4 8 25 121 7 6 6 04 10 G12 4 8 9 6 00 126 6 6 2 04 14 G12 1 6 4 5 00 125 0 1 7 04 18 G12 4 5 0 0 00 120 5 1 7 04 31 CR24 1 5 4 8 25 118 9 6 8 79 ACCOUNT Allowance for Uncollectible Accounts ACCOUNT 1135 Dec. 1 Balance 2 1 4 3 01 3 G12 4 9 8 25 1 6 4 4 76 6 G12 1 5 4 8 25 3 1 9 3 01 14 G12 1 6 4 5 00 1 5 4 8 01 31 G13 10 2 1 6 38 11 7 6 4 39 ACCOUNT Notes receivable ACCOUNT 1170 Dec. 1 Balance 22 8 0 0 00 4 CR24 5 0 0 0 00 17 8 0 0 00 10 G12 4 8 0 0 00 13 0 0 0 00 18 G12 4 5 0 0 00 17 5 0 0 00 21 CR24 4 0 0 0 00 13 5 0 0 00 ACCOUNT Uncollectible Accounts Expense ACCOUNT 6165 Dec. 31 G13 10 2 1 6 38 10 2 1 6 38 ACCOUNT Interest Income ACCOUNT 7110 Dec. 1 Balance 1 0 9 5 00 4 CR24 1 0 0 00 1 1 9 5 00 10 G12 9 6 00 1 2 9 1 00 21 CR24 1 2 0 00 1 4 1 1 00 Chapter 14 Accounting for Uncollectible Accounts Receivable 419
14-C CHALLENGE PROBLEM (LO2), p. 436 Estimating uncollectible accounts expense 1., 2. Wood Company Aging of Accounts Receivable 12/31/ Age Group Amount Percent Uncollectible Current $ 70,728.14 1 30 30,438.99 31 60 14,563.59 61 90 8,090.34 Over 90 14,574.76 $138,395.82 2.0% $ 1,414.56 4.0% 1,217.56 8.0% 1,165.09 30.0% 2,427.10 80.0% 11,659.81 $17,884.12 Current Balance of Allowance for Uncollectible Accounts Estimated Addition to Allowance for Uncollectible Accounts (6,481.18) $24,365.30 3. No, the percentages are not properly matching the expense of uncollectible accounts with revenue. The November 30 estimate of $16,559.37 was not adequate to cover the accounts written off during December. During December, accounts totalling $23,040.55 ($16,559.37 + $6,481.18) were written off. Wood Company should change the percentages to prevent the allowance account from having a debit balance. 420 Working Papers TE