Accounts Receivable

Brief Exercises & Exercises

 BE8-1
2

Presented below are three receivables transactions.

Indicate whether these receivables are reported as
accounts receivable, notes receivable, or other
receivables on a balance sheet.
(a) Sold merchandise on account for $64,000 to a
customer.
(b) Received a promissory note of $57,000 for
services performed.
(c) Advanced $10,000 to an employee.

David A . A. Weatherhead 05/23/2024 01:25 PM

(a) Sold merchandise on account for $64,000 to a
customer.
3

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
(a) A/R – ‘Customer’ 64,000
Sales 64,000

Accounts receivable

David A . A. Weatherhead 05/23/2024 01:25 PM

(b) Received a promissory note of $57,000 for services
performed.
4

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
(b) Note Receivable 57,000
Service Revenue 57,000

Note receivable

David A . A. Weatherhead 05/23/2024 01:25 PM

 (c) Advanced $10,000 to an employee.
5

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
(c) Loan Receivable 10,000
Cash 10,000

Other receivable

David A . A. Weatherhead 05/23/2024 01:25 PM

 BE8-2
6

Record the following transactions on the books of RAS

Co.
(a) On July 1, RAS Co. sold merchandise on account to
Waegelein Inc. for $17,200, terms 2/10, n/30.
(b) On July 8, Waegelein Inc. returned merchandise
worth $3,800 to RAS Co.
(c) On July 11, Waegelein Inc. paid for the merchandise.

David A . A. Weatherhead 05/23/2024 01:25 PM

(a) On July 1, RAS Co. sold merchandise on account to
Waegelein Inc. for $17,200, terms 2/10, n/30.
7

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
(a) A/R – Waegelein 17,200
Sales 17,200
(Record sales on account)

David A . A. Weatherhead 05/23/2024 01:25 PM

(b) On July 8, Waegelein Inc. returned merchandise worth
$3,800 to RAS Co.
8

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
(b) Sales Returns & Allowances 3,800
A/R - Waegelein 3,800
(Record return of goods)

David A . A. Weatherhead 05/23/2024 01:25 PM

(c) On July 11, Waegelein Inc. paid for the
merchandise.
9

How much is owed?

$17,200 - $3,800 = $13,400
Is customer entitled to discount?
Yes! 2%
Discount = 2% x $13,400 = $268
GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
(c) Cash 13,132
Sales Discount
(2% x $13,400 = $268) 268
A/R – Waegelein 13,400
(Received payment on a/c)
David A . A. Weatherhead 05/23/2024 01:25 PM
 E8-1
10

Presented below are selected transactions of Molina Company. Molina sells

in large quantities to other companies and also sells its product in a small
retail outlet.
March 1 Sold merchandise on account to Dodson Company for $5,000,
terms 2/10, n/30.
3 Dodson Company returned merchandise worth $500 to Molina.
9 Molina collected the amount due from Dodson Company from the
March 1 sale.
15 Molina sold merchandise for $400 in its retail outlet. The customer
used his Molina credit card.
31 Molina added 1.5% monthly interest to the customer’s credit card
balance.
Instructions
Prepare journal entries for the transactions above.
David A . A. Weatherhead 05/23/2024 01:25 PM
March 1 Sold merchandise on account to Dodson Company
for $5,000, terms 2/10, n/30.
11

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Mar 01 A/R – Dodson 5,000
Sales 5,000

David A . A. Weatherhead 05/23/2024 01:25 PM

March 3 Dodson Company returned merchandise worth $500
to Molina.
12

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Mar 03 Sales Returns & Allowances 500
A/R - Dodson 500

Reverse (kind of) original entry

David A . A. Weatherhead 05/23/2024 01:25 PM

March 9 Molina collected the amount due from Dodson
Company from the March 1 sale.
13

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Mar 09 Cash 4,410
Sales Discount 90
A/R - Dodson 4,500

How much is owed?

$5,000 - $500 = $4,500
Is customer entitled to discount?
Yes! 2%
Discount = 2% x $4,500 = $90
Cash received = $4,500 - $90 = $4,410
David A . A. Weatherhead 05/23/2024 01:25 PM
March 15 Molina sold merchandise for $400 in its retail
outlet. The customer used his Molina credit card.
14

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Mar 15 A/R – ‘Customer’ 400
Sales 400

David A . A. Weatherhead 05/23/2024 01:25 PM

March 31 Molina added 1.5% monthly interest to the customer’s
credit card balance.
15

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Mar 31 A/R – ‘Customer’ 6
Interest Revenue 6

David A . A. Weatherhead 05/23/2024 01:25 PM

 E8-2
16

Presented below are two independent situations.

(a) On January 6, Brumbaugh Co. sells merchandise on account

to Pryor Inc. for $7,000, terms 2/10, n/30.

On January 16, Pryor Inc. pays the amount due.
Prepare the entries on Brumbaugh’s books to record the sale
and related collection.

David A . A. Weatherhead 05/23/2024 01:25 PM

On January 6, Brumbaugh Co. sells merchandise on account
to Pryor Inc. for $7,000, terms 2/10, n/30.
17

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Jan 06 A/R – Pryor 7,000
Sales 7,000

David A . A. Weatherhead 05/23/2024 01:25 PM

On January 16, Pryor Inc. pays the amount due.
18

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Jan 16 Cash 6,860
Sales Discounts 140
A/R – Pryor 7,000

David A . A. Weatherhead 05/23/2024 01:25 PM

 E8-2
19

(b) On January 10, Andrew Farley uses his Paltrow Co. credit
card to purchase merchandise from Paltrow Co. for $9,000.
On February 10, Farley is billed for the amount due of $9,000.
On February 12, Farley pays $5,000 on the balance due.
On March 10, Farley is billed for the amount due, including
interest at 1% per month on the unpaid balance as of February
12.
Prepare the entries on Paltrow Co.’s books related to the
transactions that occurred on January 10, February 12, and
March 10.

David A . A. Weatherhead 05/23/2024 01:25 PM

On January 10, Andrew Farley uses his Paltrow Co. credit
card to purchase merchandise from Paltrow Co. for $9,000.
20

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Jan 10 A/R – Farley 9,000
Sales 9,000

David A . A. Weatherhead 05/23/2024 01:25 PM

On February 10, Farley is billed for the amount due of
$9,000.
21

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
No entry required

David A . A. Weatherhead 05/23/2024 01:25 PM

On February 12, Farley pays $5,000 on the balance due.
22

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Feb 12 Cash 5,000
A/R – Farley 5,000

David A . A. Weatherhead 05/23/2024 01:25 PM

March 10, Farley is billed for the amount due, including interest
at 1% per month on the unpaid balance as of February 12.
23

GENERAL JOURNAL
Date Account Titles and Explanation Ref. Debit Credit
Mar 10 A/R – ‘Customer’ 40
Interest Revenue 40

David A . A. Weatherhead 05/23/2024 01:25 PM

 The End

David A . A. Weatherhead 24 05/23/2024 01:25 PM