Chapter 7 Intermediate Accounting I: Brief Exercises

BE7-5 Use the information presented in BE7-4 for Wilton, Inc. (a) Instead of estimating the uncollectibles at 2% of net sales, assume that 10% of accounts receivable will prove to be uncollectible. Prepare the entry to record bad debt expense. (b) Instead of estimating uncollectibles at 2% of net sales, assume Wilton prepares an aging schedule that estimates total uncollectible accounts at $24,600. Prepare the entry to record bad debt expense.

(a) Bad Debt Expense 22,600 Allowance for Doubtful Accounts [(10% X $250,000) - $2,400] 22,600 (b) Bad Debt Expense 22,200 Allowance for Doubtful Accounts ($24,600 - $2,400) 22,200

BE7-1 Kraft Enterprises owns the following assets at December 31, 2014. Cash in bank—savings account 68,000 Checking account balance 17,000 Cash on hand 9,300 Postdated checks 750 Cash refund due from IRS 31,400 Certificates of deposit (180-day) 90,000 What amount should be reported as cash?

BRIEF EXERCISE 7-1 Cash in bank—savings account .....$68,000 Cash on hand.....9,300 Checking account balance.....17,000 Cash to be reported.....$94,300

BE7-3 Use the information from BE7-2, assuming Restin Co. uses the net method to account for cash discounts. Prepare the required journal entries for Restin Co.

BRIEF EXERCISE 7-3 June 1 Accounts Receivable 48,500* Sales Revenue 48,500 June 12 Cash 48,500 Accounts Receivable 48,500 *$50,000 - ($50,000 X .03) = $48,500

BE7-4 Wilton, Inc. had net sales in 2014 of $1,400,000. At December 31, 2014, before adjusting entries, the balances in selected accounts were: Accounts Receivable $250,000 debit, and Allowance for Doubtful Accounts $2,400 credit. If Wilton estimates that 2% of its net sales will prove to be uncollectible, prepare the December 31, 2014, journal entry to record bad debt expense.

BRIEF EXERCISE 7-4 Bad Debt Expense 28,000 Allowance for Doubtful Accounts ($1,400,000 X 2%) 28,000

BE7-2 Restin Co. uses the gross method to record sales made on credit. On June 1, 2014, it made sales of $50,000 with terms 3/15, n/45. On June 12, 2014, Restin received full payment for the June 1 sale. Prepare the required journal entries for Restin Co.

June 1 Accounts Receivable 50,000 ..........................Sales Revenue 50,000 June 12 Cash 48,500* ............................Sales Discounts 1,500 ....................Accounts Receivable 50,000 *$50,000 - ($50,000 X .03) = $48,500