Kế toán Mỹ Account receivable and Bad Dept

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... The increase in the accounts rec

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

PE 8–1A

PE 8–1B

Dec 20 Accounts Receivable—Rachel Elpel 1,350

PE 8–2A

PRACTICE EXERCISES

PE 8–2B

Dec 20 Accounts Receivable—Rachel Elpel 1,350

PE 8–3A

a $55,500 ($7,400,000 × 0.0075)

b.

Accounts Receivable………

Allowance for Doubtful Accounts ($9,000 + $55,500)………

Bad Debt Expense………

c Net realizable value ($685,000 – $64,500)………

PE 8–3B a $231,500 ($46,300,000 × 0.0050) b Accounts Receivable………

Allowance for Doubtful Accounts ($231,500 – $12,500)…………

Bad Debt Expense………

c Net realizable value ($3,460,000 – $219,000)………

231,500

$3,241,000

$620,500

Adjusted Balance

$3,460,000 219,000

Adjusted Balance

$685,000 55,500 64,500

PE 8–4A

a $41,000 ($50,000 – $9,000)

b.

Accounts Receivable………

Allowance for Doubtful Accounts………

Bad Debt Expense………

c Net realizable value ($685,000 – $50,000)………

PE 8–4B a $257,500 ($245,000 + $12,500) b Accounts Receivable………

Allowance for Doubtful Accounts………

Bad Debt Expense………

c Net realizable value ($3,460,000 – $245,000)………

PE 8–5A

a The due date for the note is September 6, determined as follows:

b $210,875 [$210,000 + ($210,000 × 5% × 30/360)]

c.

257,500

$3,215,000

$635,000

Adjusted Balance

$3,460,000 245,000

Adjusted Balance

$685,000 41,000 50,000

Average accts receivable…………

Accts receivable turnover…………

b.

Net sales………

Average daily sales………

Average accts receivable…………

Number of days’ sales in

receivables………

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

PE 8–6B

a.

Net sales………

Accounts receivable: Beginning of year………

End of year………

Average accts receivable………

Accts receivable turnover………

b Net sales………

Average daily sales………

Average accts receivable………

Number of days’ sales in receivables………

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

($590,000 ÷ $21,660.3) ($570,000 ÷ $18,427.4) [($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]

($7,906,000 ÷ 365 days) ($6,726,000 ÷ 365 days)

($7,906,000 ÷ $590,000) ($6,726,000 ÷ $570,000)

Number of Days’ Sales

[($600,000 + $580,000) ÷ 2] [($540,000 + $600,000) ÷ 2]

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.

Nov 27 Accounts Receivable—Dr Cindy Mott 37,000

EXERCISES

Accounts Receivable—Midnight Delights Co 37,500

Dec 22 Accounts Receivable—Midnight Delights Co 15,500

Accounts Receivable—Midnight Delights Co 15,500

Ex 8–5

Derby Auto Repair

Lucky’s Auto Repair

Pit Stop Auto

Reliable Auto Repair

Trident Auto

Valley Repair & Tow

68 (7 + 30 + 31) August 24

108 (16 + 31 + 30 + 31)

June 23 September 2 September 19 July 15

August 25

Not past due

6 days (31 – 25)

Days Past Due

Days Past Due

Due Date March 13

Number of Days Past Due

171 days (18 + 30 + 31 + 30 + 31 + 31) June 29

July 8

Aging of Receivables Schedule

August 31

Ex 8–10

Uncollectible accounts estimate ($74,170 – $6,350).

Ex 8–11

Ex 8–12

2014

Uncollectible accounts estimate ($44,260 + $3,375).

Estimated Age Interval

Uncollectible Accounts

Ex 8–13

July 27 Accounts Receivable—Dean Sheppard 8,450

31 No entry

Ex 8–13 (Concluded)

b Apr 13 Allowance for Doubtful Accounts 8,450

Allowance for Doubtful Accounts 6,600

July 27 Accounts Receivable—Dean Sheppard 8,450

Dec 31 Allowance for Doubtful Accounts 13,510

Uncollectible accounts estimate ($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.

Ex 8–14

Oct 16 Accounts Receivable—Kathy Quantel 8,440

31 No entry

Ex 8–14 (Continued)

b June 8 Allowance for Doubtful Accounts 8,440

Allowance for Doubtful Accounts 9,500

Oct 16 Accounts Receivable—Kathy Quantel 8,440

Dec 31 Allowance for Doubtful Accounts 24,955

Uncollectible accounts estimate ($47,090 – $1,545).

$515,000

Past Due)

Accounts

Estimated Doubtful Receivables

Balance on

Aging Class

(Number of Days

December 31

Uncollectible accounts estimate

($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).

Ex 8–18

Uncollectible accounts estimate

from aging schedule……… 109,650

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).

Past Due)

Accounts

Estimated Doubtful Aging Class

(Number of Days

$1,300,000

Receivables Balance on December 31

$ 715,000 310,000 102,000 76,000 97,000

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.

Due Date

Apr 22

Ex 8–22

2013

Accounts Receivable—Lake Shore

Accrued interest ($21,000 × 0.08 × 15/360 = $70).

Nov 9 Accounts Receivable—Accolade Co 245,600

Ex 8–24

May 18 Accounts Receivable—Glenn Cross 60,350

Oct 22 Allowance for Doubtful Accounts 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

Ex 8–26

a and b.

Net sales………

Accounts receivable………

Average accts receivable………

Accts receivable turnover……

Average daily sales………

Days’ sales in receivables……

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.

Net sales………

Accounts receivable………

Average accts receivable………

Accts receivable turnover……

Average daily sales………

Days’ sales in receivables……

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.

39.0 34.8

$486,200

($4,978,900 ÷ 365 days)

9.4 ($5,660,300 ÷ $539,450) ($4,978,900 ÷ $531,450)

[($486,200 + $576,700) ÷ 2]

$15,507.7 ($5,660,300 ÷ 365 days)

$13,640.8 10.5

Ex 8–28

a and b.

Net sales………

Accounts receivable…………

Average accts receivable……

Accts receivable turnover……

Average daily sales………

Days’ sales in receivables……

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

collecting accounts receivable by increasing from 30.7 to 37.3, a favorable trend The days’ sales in receivables indicates an increase in the efficiency of collecting accounts receivable by decreasing from 11.9 to 9.8, also indicating a favorable trend Before reaching a conclusion, however, the ratios should be compared with industry averages and similar firms.

30.7

($258 ÷ $26.3) ($281 ÷ $23.6)

11.9 9.8

$26.3 ($9,613 ÷ 365 days)

$23.6 ($8,632 ÷ 365 days)

($9,613 ÷ $258) ($8,632 ÷ $281) 37.3

$ 281

$ 258 [($267 + $249) ÷ 2] [($249 + $313) ÷ 2]

Ex 8–29

a The average accounts receivable turnover ratios are as follows:

The Limited Brands Inc.: 34.0 [(37.3 + 30.7) ÷ 2]

H.J Heinz Company: 9.4 [(9.3 + 9.5) ÷ 2]

Note: For computations of the individual ratios, see Ex 8–27 and Ex 8–28.

b The Limited Brands has the higher average accounts receivable turnover

ratio.

c The Limited Brands operates a specialty retail chain of stores that sell directly

to individual consumers Many of these consumers (retail customers) pay

with MasterCards or VISAs that are recorded as cash sales In contrast, H.J

Heinz manufactures processed foods that are sold to food wholesalers,

grocery store chains, and other food distributors that eventually sell Heinz

products to individual consumers Accordingly, because of the extended

distribution chain, we would expect Heinz to have more accounts receivable

than The Limited Brands In addition, we would expect Heinz’s business

customers to take a longer period to pay their receivables Thus, we would

expect Heinz’s average accounts receivable turnover ratio to be lower than

The Limited Brands, as shown in (a).

Prob 8–1A

2 20—

Allowance for Doubtful Accounts 10,800

May 27 Accounts Receivable—Seth Nelsen 7,350

Aug 13 Allowance for Doubtful Accounts 6,400

Oct 31 Accounts Receivable—Crawford Co 3,880

Dec 31 Allowance for Doubtful Accounts 23,200

Accounts Receivable—Crow Distributors 9,400

Uncollectible accounts estimate ($35,700 + $3,170).

PROBLEMS

Prob 8–1A (Concluded)

1 and 2.

Dec 31 Unadjusted Balance 3,170

Dec 31 Adjusting Entry 38,870 Dec 31 Adj Balance 35,700

Dec 31 Adjusting Entry 38,870

3 $1,749,300 ($1,785,000 – $35,700)

4 a $45,500 ($18,200,000 × 0.0025)

b $42,330 ($45,500 – $3,170)

c $1,742,670 ($1,785,000 – $42,330)

Allowance for Doubtful Accounts

Bad Debt Expense

Prob 8–2A

1.

Customer

Adams Sports & Flies

Blue Dun Flies

Cicada Fish Co.

Deschutes Sports

Brown Trout Fly Shop 7,500 7,500

Zigs Fish Adventures 4,000 4,000

Subtotals 1,300,000 750,000 290,000 120,000 40,000 20,000 80,000

Green River Sports 3,500 3,500

Western Trout Company 6,800 6,800

Wolfe Sports 4,400 4,400

Totals 1,342,400 754,400 296,800 125,900 51,900 28,400 85,000 Percentage uncollectible 1% 2% 10% 30% 40% 80% Estimate of uncollectible

accounts 121,000 7,544 5,936 12,590 15,570 11,360 68,000

Days Past Due

Due Date May 22, 2013

Number of Days Past Due

Not past due

Aging of Receivables Schedule

82 days (21 + 30 + 31)

93 days (1 + 31 + 30 + 31)

Nov 7, 2013 Nov 28, 2013 Dec 7, 2013 Oct 10, 2013 Sept 29, 2013

Prob 8–2A (Concluded)

Uncollectible accounts estimate

Prob 8–3A

1.

Increase Balance of

Reported Estimate of Expense End of Year

$ 4,500 $ 9,000 $4,500 $ 4,500

2 Yes The actual write-offs of accounts originating in the first two years are

reasonably close to the expense that would have been charged to those years

on the basis of 1% of sales The total write-off of receivables originating in

the first year amounted to $8,500 ($4,500 + $3,000 + $1,000), as compared with bad debt expense, based on the percentage of sales, of $9,000 ($900,000 × 1%) For the second year, the comparable amounts were $11,800 ($6,600 + $3,700 + $1,500) and $12,500 ($1,250,000 × 1%).

Apr 20 Due Date

Jan 28

(a)

June 22 Nov 17 Dec 5

Accounts Receivable—Bradford & Co 24,000

Prob 8–6A (Concluded)

Prob 8–1B

2 20—

Jan 19 Accounts Receivable—Arlene Gurley 2,660

Apr 3 Allowance for Doubtful Accounts 12,750

Allowance for Doubtful Accounts 16,500

Nov 23 Accounts Receivable—Harry Carr 4,000

Dec 31 Allowance for Doubtful Accounts 24,000

Uncollectible accounts estimate ($60,000 – $3,410).

Dec 31 Adjusting Entry 56,590

3 $2,290,000 ($2,350,000 – $60,000)

4 a $79,000 ($15,800,000 × 0.005)

b $82,410 ($79,000 + $3,410)

c $2,267,590 ($2,350,000 – $82,410)

Allowance for Doubtful Accounts

Bad Debt Expense

Excel Hair Products

First Class Hair Care

Visions Hair & Nail

One Stop Hair Designs 4,000 4,000

Visions Hair & Nail 9,000 9,000

Totals 925,600 424,000 214,000 117,000 63,500 24,600 82,500 Percentage uncollectible 1% 4% 16% 25% 40% 80% Estimate of uncollectible

accounts 123,235 4,240 8,560 18,720 15,875 9,840 66,000

Days Past Due

Due Date Aug 17, 2013

Number of Days Past Due

Not past due

Aging of Receivables Schedule

62 days (1 + 30 + 31)

181 days (28 + 31 + 30 + 31 + 30 + 31)

Nov 23, 2013 Nov 29, 2013 Dec 7, 2013 Oct 30, 2013 July 3, 2013