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CHAPTER 8
RECEIVABLES
DISCUSSION QUESTIONS
1. Receivables are normally classified as (1) accounts receivable, (2) notes receivable, or
(3) other receivables.
2. Dan’s Hardware should use the direct write-off method because it is a small business that has
a relatively small number and volume of accounts receivable.
3. Contra asset, credit balance
4. The accounts receivable and allowance for doubtful accounts may be reported at a net
amount of $661,500 ($673,400 – $11,900) in the Current Assets section of the balance sheet.
In this case, the amount of the allowance for doubtful accounts should be shown separately in
a note to the financial statements or in parentheses on the balance sheet. Alternatively, the
accounts receivable may be shown at the gross amount of $673,400 less the amount of the
allowance for doubtful accounts of $11,900, thus yielding net accounts receivable of
$661,500.
5. (1) The percentage rate used is excessive in relationship to the accounts written off as
uncollectible; hence, the balance in the allowance is excessive.
(2) A substantial volume of old uncollectible accounts is still being carried in the accounts
receivable account.
6. An estimate based on analysis of receivables provides the most accurate estimate of the
current net realizable value.
7. a. Sailfish Company
b. Notes Receivable
8. The interest will amount to $5,100 ($85,000 × 6%) only if the note is payable one year from
the date it was created. The usual practice is to state the interest rate in terms of an annual
rate, rather than in terms of the period covered by the note.
9. Debit Accounts Receivable for $243,600
Credit Notes Receivable for $240,000
Credit Interest Revenue for $3,600
10. Cash 245,427
Accounts Receivable [$240,000 + ($240,000 × 6% × 90/360)] 243,600
Interest Revenue 1,827
($243,600 × 30/360 × 9% = $1,827).
8-1
© 2014 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
CHAPTER 8 Receivables
PRACTICE EXERCISES
PE 8–1A
Feb. 12 Cash 800
Bad Debt Expense 2,400
Accounts Receivable—Leo Jorgenson 3,200
May 3 Accounts Receivable—Leo Jorgenson 2,400

3 Cash 2,400
PE 8–1B
Oct. 2 Cash 600
Accounts Receivable—Rachel Elpel 1,950
Dec. 20 Accounts Receivable—Rachel Elpel 1,350

20 Cash 1,350
PE 8–2A
Feb. 12 Cash 800
Allowance for Doubtful Accounts 2,400
May 3 Accounts Receivable—Leo Jorgenson 2,400

3 Cash 2,400
8-2
PE 8–2B
Oct. 2 Cash 600
Dec. 20 Accounts Receivable—Rachel Elpel 1,350

20 Cash 1,350
PE 8–3A
a. $55,500 ($7,400,000 × 0.0075)
b. Adjusted Balance
Accounts Receivable…………………………………………………… $685,000
Allowance for Doubtful Accounts ($9,000 + $55,500)…………… 64,500
Bad Debt Expense……………………………………………………… 55,500
c. Net realizable value ($685,000 – $64,500)…………………………… $620,500
PE 8–3B
a. $231,500 ($46,300,000 × 0.0050)
b. Adjusted Balance
Accounts Receivable…………………………………………………… $3,460,000
Allowance for Doubtful Accounts ($231,500 – $12,500)………… 219,000
Bad Debt Expense……………………………………………………… 231,500
c. Net realizable value ($3,460,000 – $219,000)……………………… $3,241,000
8-3
PE 8–4A
a. $41,000 ($50,000 – $9,000)
b. Adjusted Balance
Accounts Receivable………………………………………………… $685,000
Allowance for Doubtful Accounts…………………………………… 50,000
Bad Debt Expense……………………………………………………… 41,000
c. Net realizable value ($685,000 – $50,000)………………………… $635,000
PE 8–4B
a. $257,500 ($245,000 + $12,500)
b. Adjusted Balance
Accounts Receivable………………………………………………… $3,460,000
Allowance for Doubtful Accounts…………………………………… 245,000
Bad Debt Expense……………………………………………………… 257,500
c. Net realizable value ($3,460,000 – $245,000)……………………… $3,215,000
PE 8–5A
a. The due date for the note is September 6, determined as follows:
August …………………………………………………………….…… 24 days (31 – 7)
September……………………………………………………………… 6 days
Total……………………………………………………………………… 30 days
b. $210,875 [$210,000 + ($210,000 × 5% × 30/360)]
c.
Sept. 6 Cash 210,875
Notes Receivable 210,000
Interest Revenue 875
8-4
PE 8–5B
a. The due date for the note is August 7, determined as follows:
April…………………………………………………………………… 21 days (30 – 9)
May……………………………………………………………………. 31 days
June…………………………………………………………………… 30 days
July……………………………………………………………………. 31 days
August………………………………………………………….……… 7 days
Total…………………………………………………………………… 120 days
b. $462,000 [$450,000 + ($450,000 × 8% × 120/360)]
c. Aug. 7 Cash 462,000

PE 8–6A
a. Accounts Receivable Turnover 2014 2013
Net sales……………………………… $2,912,000 $2,958,000
Accounts receivable:
Beginning of year……………… $ 300,000 $ 280,000
End of year……………………… $ 340,000 $ 300,000
Average accts. receivable………… $ 320,000 $ 290,000
[($300,000 + $340,000) ÷ 2] [($280,000 + $300,000) ÷ 2]
Accts. receivable turnover………… 9.1 10.2
($2,912,000 ÷ $320,000) ($2,958,000 ÷ $290,000)
b. Number of Days’ Sales

in Receivables 2014 2013
Net sales……………………………… $2,912,000 $2,958,000
Average daily sales………………… $ 7,978.1 $ 8,104.1
($2,912,000 ÷ 365 days) ($2,958,000 ÷ 365 days)
Average accts. receivable………… $ 320,000 $ 290,000
[($300,000 + $340,000) ÷ 2] [($280,000 + $300,000) ÷ 2]
Number of days’ sales in
receivables………………………… 40.1 days 35.8 days
($320,000 ÷ $7,978.1) ($290,000 ÷ $8,104.1)
c. The decrease in the accounts receivable turnover from 10.2 to 9.1 and the
increase in the number of days’ sales in receivables from 35.8 days to 40.1
days indicate unfavorable trends in the efficiency of collecting receivables.
8-5
PE 8–6B
a. Accounts Receivable Turnover 2014 2013
Net sales………………………………… $7,906,000 $6,726,000
Accounts receivable:
Beginning of year………………… $ 600,000 $ 540,000
End of year………………………… $ 580,000 $ 600,000
Average accts. receivable…………… $ 590,000 $ 570,000
[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]
Accts. receivable turnover…………… 13.4 11.8
($7,906,000 ÷ $590,000) ($6,726,000 ÷ $570,000)
b. Number of Days’ Sales

in Receivables 2014 2013
Net sales………………………………… $7,906,000 $6,726,000
Average daily sales…………………… $ 21,660.3 $ 18,427.4
($7,906,000 ÷ 365 days) ($6,726,000 ÷ 365 days)
Average accts. receivable…………… $ 590,000 $ 570,000
[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]
Number of days’ sales in
receivables…………………………… 27.2 days 30.9 days
($590,000 ÷ $21,660.3) ($570,000 ÷ $18,427.4)
c. The increase in the accounts receivable turnover from 11.8 to 13.4 and the
decrease in the number of days’ sales in receivables from 30.9 days to 27.2
days indicate favorable trends in the efficiency of collecting receivables.
8-6
EXERCISES
Ex. 8–1
Accounts receivable from the U.S. government are significantly different from
receivables from commercial aircraft carriers such as Delta and United. Thus,
Boeing should report each type of receivable separately. In its filing with the
Securities and Exchange Commission, Boeing reports the receivables together
on the balance sheet, but discloses each receivable separately in a note to the
financial statements.
Ex. 8–2
a. MGM Resorts International: 22.6% ($93,760,000 ÷ $415,654,000)
b. Johnson & Johnson: 3.4% ($340,000,000 ÷ $10,114,000,000)
c. Casino operations experience greater bad debt risk, since it is difficult to
control the creditworthiness of customers entering the casino. In addition,
individuals who may have adequate creditworthiness could overextend
themselves and lose more than they can afford if they get caught up in the
excitement of gambling. In contrast, Johnson & Johnson’s customers are
primarily other businesses such as grocery store chains.
Ex. 8–3
Jan. 30 Accounts Receivable—Dr. Cindy Mott 85,000
Sales 85,000
30 Cost of Merchandise Sold 50,000

Merchandise Inventory 50,000
June 3 Cash 48,000

Accounts Receivable—Dr. Cindy Mott 85,000
Nov. 27 Accounts Receivable—Dr. Cindy Mott 37,000

27 Cash 37,000
Accounts Receivable—Dr. Cindy Mott 37,000
8-7
Ex. 8–4
Mar. 19 Accounts Receivable—Midnight Delights Co. 37,500
Sales 37,500
19 Cost of Merchandise Sold 23,000

Merchandise Inventory 23,000
Aug. 31 Cash 22,000

Accounts Receivable—Midnight Delights Co. 37,500
Dec. 22 Accounts Receivable—Midnight Delights Co. 15,500

22 Cash 15,500
Accounts Receivable—Midnight Delights Co. 15,500
Ex. 8–5
a. Bad Debt Expense 11,750
Accounts Receivable—Wil Treadwell 11,750
b. Allowance for Doubtful Accounts 11,750

Accounts Receivable—Wil Treadwell 11,750
Ex. 8–6
a. $501,000 ($66,800,000 × 0.0075) c. $334,000 ($66,800,000 × 0.0050)
b. $493,000 ($475,000 + $18,000) d. $350,000 ($360,000 – $10,000)
Ex. 8–7
Account Due Date Number of Days Past Due
Avalanche Auto August 8 84 (23 + 30 + 31)
Bales Auto October 11 20 (31 – 11)
Derby Auto Repair June 23 130 (7 + 31 + 31 + 30 + 31)
Lucky’s Auto Repair September 2 59 (28 + 31)
Pit Stop Auto September 19 42 (11 + 31)
Reliable Auto Repair July 15 108 (16 + 31 + 30 + 31)
Trident Auto August 24 68 (7 + 30 + 31)
Valley Repair & Tow May 17 167 (14 + 30 + 31 + 31 + 30 +
8-8
Ex. 8–8
a.
Customer Due Date Number of Days Past Due
Color World Industries March 13 171 days (18 + 30 + 31 + 30 + 31 + 31)
Hawks Company June 29 63 days (1 + 31 + 31)
Osler Inc. July 8 54 days (23 + 31)
Sather Sales Company September 6 Not past due
Wisdom Company August 25 6 days (31 – 25)
b.
Aging of Receivables Schedule
August 31
Days Past Due
Not Past Over
Customer Balance Due 1–30 31–60 61–90 90
Allied Industries Inc. 3,000 3,000
Archer Company 4,500 4,500
Zussman Company 5,000 5,000

Subtotals 750,000 480,000 160,000 75,000 28,000 7,000
Color World Industries 33,000 33,000
Hawks Company 15,000 15,000
Osler Inc. 21,000 21,000
Sather Sales Company 8,000 8,000
Wisdom Company 6,500 6,500
Totals 833,500 488,000 166,500 96,000 43,000 40,000
Ex. 8–9
Days Past Due
Not Past Over
Balance Due 1–30 31–60 61–90 90
Total receivables 833,500 488,000 166,500 96,000 43,000 40,000
Percentage uncollectible 2% 6% 12% 30% 75%
Allowance for doubtful
accounts 74,170 9,760 9,990 11,520 12,900 30,000
8-9
Ex. 8–10
Aug. 31 Bad Debt Expense 67,820
Uncollectible accounts estimate
($74,170 – $6,350).
Ex. 8–11
Estimated
Uncollectible Accounts
Age Interval Balance Percent Amount
Not past due $ 740,000 0.5% $ 3,700
1–30 days past due 390,000 2% 7,800
31–60 days past due 85,000 4% 3,400
61–90 days past due 28,000 14% 3,920
91–180 days past due 42,000 32% 13,440
Over 180 days past due 15,000 80% 12,000
Total $1,300,000 $44,260
Ex. 8–12
2014
Dec. 31 Bad Debt Expense 47,635
($44,260 + $3,375).
8-10
Ex. 8–13
a. Apr. 13 Bad Debt Expense 8,450
Accounts Receivable—Dean Sheppard 8,450
May 15 Cash 500

Accounts Receivable—Dan Pyle 7,100
July 27 Accounts Receivable—Dean Sheppard 8,450

27 Cash 8,450

Accounts Receivable—Paul Chapman 2,225
Accounts Receivable—Duane DeRosa 3,550
Accounts Receivable—Teresa Galloway 4,770
Accounts Receivable—Ernie Klatt 1,275
Accounts Receivable—Marty Richey 1,690
31 No entry
8-11
Ex. 8–13 (Concluded)

b. Apr. 13 Allowance for Doubtful Accounts 8,450
May 15 Cash 500

Accounts Receivable—Dan Pyle 7,100
July 27 Accounts Receivable—Dean Sheppard 8,450

27 Cash 8,450
Dec. 31 Allowance for Doubtful Accounts 13,510

Accounts Receivable—Paul Chapman 2,225
Accounts Receivable—Duane DeRosa 3,550
Accounts Receivable—Teresa Galloway 4,770
Accounts Receivable—Ernie Klatt 1,275
Accounts Receivable—Marty Richey 1,690
31 Bad Debt Expense 28,335

($3,778,000 × 0.75% = $28,335).
c. Bad debt expense under:

Allowance method………………………...……………………………………… $28,335
Direct write-off method ($8,450 + $6,600 – $8,450 + $13,510)……………… 20,110
Difference ($28,335 – $20,110)…………………………………………………… $ 8,225
Shipway Company’s income would be $8,225 higher under the direct write-off
method than under the allowance method.
8-12
Ex. 8–14
a. June 8 Bad Debt Expense 8,440
Accounts Receivable—Kathy Quantel 8,440
Aug. 14 Cash 3,000

Accounts Receivable—Rosalie Oakes 12,500
Oct. 16 Accounts Receivable—Kathy Quantel 8,440

16 Cash 8,440

Accounts Receivable—Wade Dolan 4,600
Accounts Receivable—Greg Gagne 3,600
Accounts Receivable—Amber Kisko 7,150
Accounts Receivable—Shannon Poole 2,975
Accounts Receivable—Niki Spence 6,630
31 No entry
8-13
Ex. 8–14 (Continued)

b. June 8 Allowance for Doubtful Accounts 8,440
Aug. 14 Cash 3,000

Accounts Receivable—Rosalie Oakes 12,500
Oct. 16 Accounts Receivable—Kathy Quantel 8,440

16 Cash 8,440
Dec. 31 Allowance for Doubtful Accounts 24,955

Accounts Receivable—Wade Dolan 4,600
Accounts Receivable—Greg Gagne 3,600
Accounts Receivable—Amber Kisko 7,150
Accounts Receivable—Shannon Poole 2,975
Accounts Receivable—Niki Spence 6,630
31 Bad Debt Expense 45,545

($47,090 – $1,545).
Computations:
Aging Class Receivables Estimated Doubtful
(Number of Days Balance on Accounts
Past Due) December 31 Percent Amount
0–30 days $320,000 1% $ 3,200
31–60 days 110,000 3% 3,300
61–90 days 24,000 10% 2,400
91–120 days 18,000 33% 5,940
More than 120 days 43,000 75% 32,250
Total receivables $515,000 $47,090
Estimated balance of allowance account from aging schedule…………………… $47,090

Unadjusted credit balance of allowance account*…………………………………… 1,545
Adjustment…………………………………………………………………………………… $45,545
* $36,000 – $8,440 – $9,500 + $8,440 – $24,955 = $1,545
8-14
Ex. 8–14 (Concluded)

c. Bad debt expense under:
Allowance method………………………………………………………………… $45,545
Direct write-off method ($8,440 + $9,500 – $8,440 + $24,955)……………… 34,455
Difference…………………………………………………………………………… $11,090
Rustic Tables’ income would be $11,090 higher under the direct write-off method
than under the allowance method.
Ex. 8–15
$482,800 [$487,500 + $27,800 – ($3,250,000 × 1%)]
Ex. 8–16
a. $593,000 [$600,000 + $34,000 – ($4,100,000 × 1%)]
b. $11,700 ($32,500 – $27,800) + ($41,000 – $34,000)
Ex. 8–17
Accounts Receivable—Shawn Brooke 4,650
Accounts Receivable—Eve Denton 5,180
Accounts Receivable—Art Malloy 11,050
Accounts Receivable—Cassie Yost 9,120

Accounts Receivable—Shawn Brooke 4,650
Accounts Receivable—Eve Denton 5,180
Accounts Receivable—Art Malloy 11,050
Accounts Receivable—Cassie Yost 9,120

($5,250,000 × 0.75% = $39,375).
c. Net income would have been $9,375 higher in 2014 under the direct write-off
method, because bad debt expense would have been $9,375 higher under
the allowance method ($39,375 expense under the allowance method vs.
$30,000 expense under the direct write-off method).
8-15
Ex. 8–18
Accounts Receivable—Kim Abel 21,550
Accounts Receivable—Lee Drake 33,925
Accounts Receivable—Jenny Green 27,565
Accounts Receivable—Mike Lamb 19,460

Accounts Receivable—Kim Abel 21,550
Accounts Receivable—Lee Drake 33,925
Accounts Receivable—Jenny Green 27,565
Accounts Receivable—Mike Lamb 19,460

($109,650 + $7,500).
Computations:
Aging Class Receivables Estimated Doubtful
(Number of Days Balance on Accounts
Past Due) December 31 Percent Amount
0–30 days $ 715,000 1% $ 7,150
31–60 days 310,000 2% 6,200
61–90 days 102,000 15% 15,300
91–120 days 76,000 30% 22,800
More than 120 days 97,000 60% 58,200
Total receivables $1,300,000 $109,650
Unadjusted debit balance of Allowance for Doubtful Accounts

($102,500 – $95,000)……………………………………………………………………… $ 7,500
Estimated balance of Allowance for Doubtful Accounts
from aging schedule…………………………………………………………………… 109,650
Adjustment………………………………………………………………………………… $117,150
c. Net income would have been $14,650 lower in 2014 under the allowance
method, because bad debt expense would have been $14,650 higher under
the allowance method ($117,150 expense under the allowance method versus
$102,500 expense under the direct write-off method).
8-16
Ex. 8–19
Due Date Interest
a. Apr. 22 $1,100 [$55,000 × 0.08 × (90/360)]
b. May 8 300 [$36,000 × 0.05 × (60/360)]
c. July 30 390 [$78,000 × 0.04 × (45/360)]
d. Nov. 3 161 [$13,800 × 0.07 × (60/360)]
e. Jan. 29 1,160 [$58,000 × 0.06 × (120/360)]
Ex. 8–20
a. June 18 (10 + 31 + 30 + 31 + 18)
b. $153,500 [($150,000 × 7% × 120/360) + $150,000]
c. (1) Notes Receivable 150,000
Accounts Rec.—Dry Creek Interior Decorators 150,000
(2) Cash 153,500

Ex. 8–21
1. Sale on account.
2. Cost of merchandise sold for the sale on account.
3. A sale return or allowance.
4. Cost of merchandise returned.
5. Note received from customer on account.
6. Note dishonored and charged maturity value of note to customer’s account
receivable.
7. Payment received from customer for dishonored note plus interest earned
after due date.
8-17
Ex. 8–22
2013
Dec. 16 Notes Receivable 21,000
Accounts Receivable—Lake Shore
Clothing & Bags Co. 21,000
31 Interest Receivable 70
Interest Revenue 70
Accrued interest
($21,000 × 0.08 × 15/360 = $70).
31 Interest Revenue 70
Income Summary 70
2014
Mar. 16 Cash 21,420
Interest Receivable 70
($21,000 × 0.08 × 75/360).
Ex. 8–23
July 12 Notes Receivable 240,000
Accounts Receivable—Accolade Co. 240,000
Nov. 9 Accounts Receivable—Accolade Co. 245,600

($240,000 × 0.07 × 120/360).
Dec. 9 Cash 247,442

Accounts Receivable—Accolade Co. 245,600
($245,600 × 0.09 × 30/360).
8-18
Ex. 8–24
Apr. 18 Notes Receivable 60,000
Accounts Receivable—Glenn Cross 60,000
30 Notes Receivable 42,000

Accounts Receivable—Rhoni Melville 42,000
May 18 Accounts Receivable—Glenn Cross 60,350

($60,000 × 7% × 30/360).
June 29 Accounts Receivable—Rhoni Melville 42,560

($42,000 × 8% × 60/360).
Aug. 16 Cash 61,557

Accounts Receivable—Glenn Cross 60,350
($60,350 × 8% × 90/360).
Oct. 22 Allowance for Doubtful Accounts 42,560

Accounts Receivable—Rhoni Melville 42,560
Ex. 8–25
1. The interest receivable should be reported separately as a current asset. It
should not be deducted from notes receivable.
2. The allowance for doubtful accounts should be deducted from accounts
receivable.
A corrected partial balance sheet would be as follows:
NAPA VINO COMPANY

Balance Sheet
December 31, 2014
Assets
Current assets:
Cash $ 78,500
Notes receivable 300,000
Accounts receivable $1,200,000
Less allowance for doubtful accounts 11,500 1,188,500
Interest receivable 4,500
8-19
Ex. 8–26
a. and b.
Year 2 Year 1
Net sales………………………… $5,660,300 $4,978,900
Accounts receivable…………… $592,700 $486,200
Average accts. receivable……… $539,450 $531,450
[($592,700 + $486,200) ÷ 2] [($486,200 + $576,700) ÷ 2]
Accts. receivable turnover…… 10.5 9.4
($5,660,300 ÷ $539,450) ($4,978,900 ÷ $531,450)
Average daily sales…………… $15,507.7 $13,640.8
($5,660,300 ÷ 365 days) ($4,978,900 ÷ 365 days)
Days’ sales in receivables…… 34.8 39.0
($539,450 ÷ $15,507.7) ($531,450 ÷ $13,640.8)
c. The accounts receivable turnover indicates an increase in the efficiency of collecting

accounts receivable by increasing from 9.4 to 10.5, a favorable trend. The days’ sales
in receivables also indicates an increase in the efficiency of collecting accounts
receivable by decreasing from 39.0 to 34.8, which is a favorable trend. However,
before reaching a final conclusion, the ratios should be compared with industry
averages and similar firms.
Ex. 8–27
a. and b.
Year 2 Year 1
Net sales………………………… $10,706,588 $10,494,983
Accounts receivable…………… $1,265,032 $1,045,338
Average accts. receivable……… $1,155,185 $1,108,567.5
[($1,265,032 + $1,045,338) ÷ 2] [($1,045,338 + $1,171,797) ÷ 2]
Accts. receivable turnover…… 9.3 9.5
($10,706,588 ÷ $1,155,185) ($10,494,983 ÷ $1,108,567.5)
Average daily sales…………… $29,333.1 $28,753.4
($10,706,588 ÷ 365 days) ($10,494,983 ÷ 365 days)
Days’ sales in receivables…… 39.4 38.6
($1,155,185 ÷ $29,333.1) ($1,108,567.5 ÷ $28,753.4)
c. The accounts receivable turnover indicates a decrease in the efficiency of collecting

accounts receivable by decreasing from 9.5 to 9.3, an unfavorable trend. The number
of days’ sales in receivables increased from 38.6 to 39.4 days, also indicating an
unfavorable trend in collections of receivables. These unfavorable trends are
consistent with the economic downturn that occurred worldwide in Year 1 and Year 2.
However, before reaching a final conclusion, both ratios should be compared with
those of past years, industry averages, and similar firms.
8-20
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Corporate Financial Accounting 12th

Edition Warren Solutions Manual

Corporate Financial Accounting 12th Edition Warren Test

Corporate Financial Accounting 14th Edition Warren

Corporate Financial Accounting 13th Edition Warren

Financial and Managerial Accounting 12th Edition Warren

Corporate Financial Accounting 13th Edition Warren Test

Corporate Financial Accounting 14th Edition Warren Test

Managerial Accounting 12th Edition Warren Solutions

Financial and Managerial Accounting 12th Edition Warren

May 3 Accounts Receivable—Leo Jorgenson 2,400

Dec. 20 Accounts Receivable—Rachel Elpel 1,350

May 3 Accounts Receivable—Leo Jorgenson 2,400

Dec. 20 Accounts Receivable—Rachel Elpel 1,350

b. $462,000 [$450,000 + ($450,000 × 8% × 120/360)]

c. Aug. 7 Cash 462,000

b. Number of Days’ Sales

b. Number of Days’ Sales

30 Cost of Merchandise Sold 50,000

June 3 Cash 48,000

Nov. 27 Accounts Receivable—Dr. Cindy Mott 37,000

19 Cost of Merchandise Sold 23,000

Aug. 31 Cash 22,000

Dec. 22 Accounts Receivable—Midnight Delights Co. 15,500

b. Allowance for Doubtful Accounts 11,750

Zussman Company 5,000 5,000

May 15 Cash 500

July 27 Accounts Receivable—Dean Sheppard 8,450

Dec. 31 Bad Debt Expense 13,510

Ex. 8–13 (Concluded)

May 15 Cash 500

July 27 Accounts Receivable—Dean Sheppard 8,450

Dec. 31 Allowance for Doubtful Accounts 13,510

31 Bad Debt Expense 28,335

c. Bad debt expense under:

Aug. 14 Cash 3,000

Oct. 16 Accounts Receivable—Kathy Quantel 8,440

Dec. 31 Bad Debt Expense 24,955

Ex. 8–14 (Continued)

Aug. 14 Cash 3,000

Oct. 16 Accounts Receivable—Kathy Quantel 8,440

Dec. 31 Allowance for Doubtful Accounts 24,955

31 Bad Debt Expense 45,545

Estimated balance of allowance account from aging schedule…………………… $47,090

* $36,000 – $8,440 – $9,500 + $8,440 – $24,955 = $1,545

Ex. 8–14 (Concluded)

b. Allowance for Doubtful Accounts 30,000

Bad Debt Expense 39,375

b. Allowance for Doubtful Accounts 102,500

Bad Debt Expense 117,150

Unadjusted debit balance of Allowance for Doubtful Accounts

(2) Cash 153,500

Nov. 9 Accounts Receivable—Accolade Co. 245,600

Dec. 9 Cash 247,442

30 Notes Receivable 42,000

May 18 Accounts Receivable—Glenn Cross 60,350

June 29 Accounts Receivable—Rhoni Melville 42,560

Aug. 16 Cash 61,557

Oct. 22 Allowance for Doubtful Accounts 42,560

NAPA VINO COMPANY

c. The accounts receivable turnover indicates an increase in the efficiency of collecting

c. The accounts receivable turnover indicates a decrease in the efficiency of collecting

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