Chapter 7 ACC

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $154,500, allowance for doubtful accounts of $1,165 (credit) and sales of $1,175,000. If uncollectible accounts are estimated to be 0.5% of sales, what is the amount of the bad debts expense adjusting entry?

$1,175,000 × 0.500% = $5,875

Craigmont uses the allowance method to account for uncollectible accounts. Its year-end unadjusted trial balance shows Accounts Receivable of $110,500, allowance for doubtful accounts of $725 (credit) and sales of $955,000. If uncollectible accounts are estimated to be 7% of accounts receivable, what is the amount of the bad debts expense adjusting entry?

$110,500 × 7.00% = $7,735 − $725 = $7,010

The following selected amounts are reported on the year-end unadjusted trial balance report for a company that uses the percent of sales method to determine its bad debts expense. Accounts receivable$437,000Debit Allowance for Doubtful Accounts 1,270Debit Net Sales 2,120,000Credit All sales are made on credit. Based on past experience, the company estimates 3.0% of credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

$2,120,000 × 0.03 = $63,600 Debit Bad Debts Expense $63,600; credit Allowance for Doubtful Accounts $63,600.

On November 19, Nicholson Company receives a $22,800, 60-day, 5% note from a customer as payment on account. What adjusting entry should be made on the December 31 year-end? (Use 360 days a year.)

$22,800 × 0.05 × 42/360 = $133 Debit Interest Receivable $133; credit Interest Revenue $133.

A company borrowed $30,000 by signing a 120-day promissory note at 8%. The total to be paid at maturity of the note is: (Use 360 days a year.)

$30,000 + ($30,000 × 0.08 × 120/360) = $30,800.00

A company borrowed $30,000 by signing a 120-day promissory note at 8%. The total interest due on the maturity date is: (Use 360 days a year.)

$30,000 × 0.08 × 120/360 = $800.00

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense reports the following selected amounts: Accounts receivable$442,000Debit Allowance for Doubtful Accounts 1,320Credit Net Sales 2,170,000Credit All sales are made on credit. Based on past experience, the company estimates 3.0% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

$442,000 × 0.030 = $13,260 − $1,320 = $11,940 Debit Bad Debts Expense $11,940; credit Allowance for Doubtful Accounts $11,940.

The unadjusted trial balance at year-end for a company that uses the percent of receivables method to determine its bad debts expense, reports the following selected amounts: Accounts receivable$444,000Debit Allowance for Doubtful Accounts 1,340Debit Net Sales 2,190,000Credit All sales are made on credit. Based on past experience, the company estimates 3.0% of ending account receivable to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

$444,000 × 0.030 = $13,320 + $1,340 = $14,660 Debit Bad Debts Expense $14,660; credit Allowance for Doubtful Accounts $14,660.

Jasper makes a $48,000, 90-day, 8.0% cash loan to Clayborn Co. The amount of interest that Jasper will collect on the loan is: (Use 360 days a year.)

$48,000 × 8.0% × 90/360 = $960.00

A company factored $54,000 of its accounts receivable and was charged a 3% factoring fee. The journal entry to record this transaction would include a:

$54,000 × 0.03 = $1,620; $54,000 − $1,620 = $52,380 Debit to Cash of $52,380, a debit to Factoring Fee Expense of $1,620, and a credit to Accounts Receivable of $54,000.

The interest accrued on $6,500 at 6% for 60 days is: (Use 360 days a year.)

$6,500 × 0.06 × 60/360 = $65

A company receives a 5%, 90-day note for $6,600. The total interest due on the maturity date is: (Use 360 days a year.)

$6,600 × 0.05 × 90/360 = $82.50

Duerr Company makes a $68,000, 60-day, 12% cash loan to Ryan Co. The note and interest to be collected at maturity is: (Use 360 days a year.)

$68,000 × 0.12 × 60/360 = $1,360 interest. $68,000 + $1,360 = $69,360 maturity value.

On July 9, Mifflin Company receives a $7,600, 90-day, 4% note from customer Payton Summers as payment on account. Compute the amount due at maturity for the note and interest. (Use 360 days a year.)

$7,600 × 0.04 × 90/360 = $76 + $7,600 = $7,676

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable$352,000debit Allowance for uncollectible accounts 630debit Net Sales 797,000credit All sales are made on credit. Based on past experience, the company estimates 0.5% of net credit sales to be uncollectible. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

$797,000 × 0.005 = $3,985 Debit Bad Debts Expense $3,985; credit Allowance for Doubtful Accounts $3,985.

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable$357,000debit Allowance for uncollectible accounts 520debit Net Sales 802,000credit All sales are made on credit. Based on past experience, the company estimates that 0.4% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

$802,000 × 0.004 = $3,208

A company uses the percent of sales method to determine its bad debts expense. At the end of the current year, the company's unadjusted trial balance reported the following selected amounts: Accounts receivable$376,000debit Allowance for uncollectible accounts 510credit Net Sales 810,000credit All sales are made on credit. Based on past experience, the company estimates that 0.5% of net credit sales are uncollectible. What amount should be debited to Bad Debts Expense when the year-end adjusting entry is prepared?

$810,000 × 0.005 = $4,050

On July 9, Mifflin Company receives an $9,200, 90-day, 8% note from customer Payton Summers as payment on account. What entry should be made on the maturity date assuming the maker pays in full, and no adjusting entries have been made related to the note? (Use 360 days a year.)

$9,200 × 0.08 × 90/360 = $184 + $9,200 = $9,384 Debit Cash $9,384; credit Interest Revenue $184; credit Notes Receivable $9,200.

A company has net sales of $2,200,000 and average accounts receivable of $440,000. What is its accounts receivable turnover for the period?

Accounts Receivable Turnover = Net Sales/Average Accounts Receivable Accounts Receivable Turnover = $2,200,000/$440,000 = 5.00

A company had net sales of $660,000, total sales of $810,000, and an average accounts receivable of $78,000. Its accounts receivable turnover equals:

Accounts Receivable Turnover = Net Sales/Average Accounts Receivable Accounts Receivable Turnover = $660,000/$78,000 = 8.46

A company had total sales of $1,000,000, net sales of $975,800, and an average accounts receivable of $119,000. Its accounts receivable turnover equals:

Accounts Receivable Turnover = Net Sales/Average Accounts Receivable Accounts Receivable Turnover = $975,800/$119,000 = 8.2

Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, the Gideon Company wrote off the $2,300 uncollectible account of its customer, A. Hopkins. The entry or entries Gideon makes to record the write off of the account on May 3 is:

Allowance for Doubtful Accounts. 2,300 Accounts Receivable—A. Hopkins 2,300

At the end of the current year, using the aging of receivable method, management estimated that $34,500 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a debit balance of $1,000. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Bad Debts Expense. 35,500 Allowance for Doubtful Accounts 35,500

Brinker accepts all major bank credit cards, including First Savings Bank's, which assesses a 4.5% charge on sales for using its card. On May 26, Brinker had $5,000 in First Savings Bank Card credit sales. What entry should Brinker make on May 26 to record the deposit?

Credit card fee expense: $5,000 × 0.045 = $225Cash received: $5,000 − $225 = $4,775 Debit Cash $4,775; debit Credit Card Expense $225; credit Sales $5,000.

Jervis accepts all major bank credit cards, including those issued by Northern Bank (NB), which assesses a 5.0% charge on sales for using its card. On June 28, Jervis had $5,400 in NB Card credit sales. What entry should Jervis make on June 28 to record the deposit?

Credit card fee expense: $5,400 × 5.0% = $270.00Cash received: $5,400 − $270.00 = $5,130.00 Debit Cash $5,130.00; debit Credit Card Expense $270.00; credit Sales $5,400

Mullis Company sold merchandise on account to a customer for $705, terms n/30. The journal entry to record this sale transaction would be:

Debit Accounts Receivable $705 and credit Sales $705.

On February 1, a customer's account balance of $3,900 was deemed to be uncollectible. What entry should be recorded on February 1 to record the write-off assuming the company uses the allowance method?

Debit Allowance for Doubtful Accounts $3,900; credit Accounts Receivable $3,900.

Winkler Company borrows $100,000 and pledges its receivables as security. The journal entry to record this transaction would be:

Debit Cash $100,000 and credit Notes Payable $100,000.

Jasper makes a $45,000, 90-day, 6.5% cash loan to Clayborn Co. Jasper's entry to record the collection of the note and interest at maturity should be: (Use 360 days a year.)

Debit Cash $45,731.25; credit Interest Revenue $731.25; credit Notes Receivable $45,000.

MacKenzie Company sold $520 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 1.0% service charge for sales on its credit cards and credits MacKenzie's account immediately when sales are made. The journal entry to record this sale transaction would be:

Debit Cash $514.80; debit Credit Card Expense $5.20 and credit Sales $520.

MacKenzie Company sold $640 of merchandise to a customer who used a Regional Bank credit card. Regional Bank deducts a 5.5% service charge for sales on its credit cards. MacKenzie electronically remits the credit card sales receipts to the credit card company and receives payment immediately. The journal entry to record this sale transaction would be:

Debit Cash $604.80; debit Credit Card Expense $35.20 and credit Sales $640.

On November 1, Orpheum Company accepted a $10,200, 90-day, 10% note from a customer to settle his account. What entry should be made on the November 1 to record the acceptance of the note?

Debit Note Receivable $10,200; credit Accounts Receivable $10,200.

Giorgio Italian Market bought $10,500 worth of merchandise from Food Suppliers and signed a 120-day, 6% promissory note for the $10,500. Food Supplier's journal entry to record the sales transaction is:

Debit Notes Receivable $10,500; credit Sales $10,500.

Jax Recording Studio purchased $6,600 in electronic components from Music World. Jax signed a 120-day, 8% promissory note for $6,600. Music World's journal entry to record the sales transaction is:

Debit Notes Receivable $6,600; credit Sales $6,600

On July 9, Mifflin Company receives a $9,100, 150-day, 12% note from customer Payton Summers as payment on account. What entry should be made on July 9 to record receipt of the note?

Debit Notes Receivable $9,100; credit Accounts Receivable $9,100.

Jasper makes a $88,000, 90-day, 7% cash loan to Clayborn Co. Jasper's entry to record the transaction should be:

Debit Notes Receivable for $88,000; credit Cash $88,000.

A company has $110,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 6% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $1,000 debit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Desired balance in allowance account:$110,000 × 0.06 =$6,600credit Current balance in allowance account: +1,000debit ****Adjustment to allowance: $7,600credit***

At the end of the current year, using the aging of receivable method, management estimated that $24,750 of the accounts receivable balance would be uncollectible. Prior to any year-end adjustments, the Allowance for Doubtful Accounts had a credit balance of $465. What adjusting entry should the company make at the end of the current year to record its estimated bad debts expense?

Desired balance in allowance account:$24,750credit Current balance: 465credit Required: adjustment to allowance$24,285credit Bad Debts Expense. 24,285 Allowance for Doubtful Accounts 24,285

A company has $93,000 in outstanding accounts receivable and it uses the allowance method to account for uncollectible accounts. Experience suggests that 5% of outstanding receivables are uncollectible. The current balance (before adjustments) in the allowance for doubtful accounts is a(n) $830 credit. The journal entry to record the adjustment to the allowance account includes a debit to Bad Debts Expense for:

Desired balance in allowance account:$93,000 × 0.05 =$4,650credit Current balance in allowance account: -830credit ***Adjustment to allowance: $3,820credit****

On December 31 of the current year, the unadjusted trial balance of a company using the percent of receivables method to estimate bad debt included the following: Accounts Receivable, debit balance of $98,200; Allowance for Doubtful Accounts, credit balance of $1,061. What amount should be debited to Bad Debts Expense, assuming 3% of outstanding accounts receivable at the end of the current year are estimated to be uncollectible?

Desired balance in allowance account:$98,200 × 0.03 =$2,946 creditCurrent balance in allowance account: −1,061credit *Required: amount of Bad Debts Expense: $1,885 credit* Answer:1885

Jervis sells $2,500 of its accounts receivable to Northern Bank in order to obtain necessary cash. Northern Bank charges a 2% factoring fee. What entry should Jervis make to record the transaction?

Factoring fee expense: $2,500 × 0.02 = $50Cash received: $2,500 − $50 = $2,450 Debit Cash $2,450; debit Factoring Fee Expense $50; credit Accounts Receivable $2,500

Giorgio Italian Market bought $7,800 worth of merchandise from Food Suppliers and signed a 90-day, 8% promissory note for the $7,800. Food Supplier's journal entry to record the collection on the maturity date is: (Use 360 days a year.)

Interest = $7,800 × 0.08 × 90/360 = $156Maturity Value = $7,800 + $156 = $7,956 Debit Cash $7,956; credit Interest Revenue $156; credit Notes Receivable $7,800

The total amount of the note and interest due on the maturity date of a $10,800, 60-day 7%, note receivable is: (Use 360 days a year.)

Interest: $10,800 × 0.07 × 60/360 = $126Maturity value: $10,800 + $126 = $10,926***