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Chapter 8: Q2RQ (page 465)
List some common examples of other receivables, besides accounts receivable and notes receivable.
Answer
Dividends receivable, interest receivable, and taxes receivable are typical illustrations of other receivables.
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When is bad debts expense recorded when using the direct write-off method?
Applying the allowance method to account for uncollectibles
The Accounts Receivable balance and Allowance for Bad Debts for Signature Lamp
Company at December 31, 2017, was \(10,800 and \)2,000 (credit balance), respectively.
During 2018, Signature Lamp Company completed the following transactions:
a. Sales revenue on account, \(273,400 (ignore Cost of Goods Sold).
b. Collections on account, \)223,000.
c. Write-offs of uncollectibles, \(5,900.
d. Bad debts expense of \)5,200 was recorded
Requirements
1. Journalize Signature Lamp Company’s transactions for 2018 assuming Signature Lamp Company uses the allowance method.
2. Post the transactions to the Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense T-accounts, and determine the ending balance of each account.
3. Show how accounts receivable would be reported on the balance sheet at December 31, 2018.
Sleepy Recliner Chairs completed the following selected transactions:
2018
Jul. 1 Sold merchandise inventory to Stan-Mart, receiving a \(41,000, nine-month, 8%
note. Ignore Cost of Goods Sold.
Oct. 31 Recorded cash sales for the period of \)24,000. Ignore Cost of Goods Sold.
Dec. 31 Made an adjusting entry to accrue interest on the Stan-Mart note.
31 Made an adjusting entry to record bad debts expense based on an aging
of accounts receivable. The aging schedule shows that \(13,800 of accounts
receivable will not be collected. Prior to this adjustment, the credit balance in
Allowance for Bad Debts is \)11,800.
2019
Apr. 1 Collected the maturity value of the Stan-Mart note.
Jun. 23 Sold merchandise inventory to Appeal, Corp., receiving a 60-day, 6% note for
\(7,000. Ignore Cost of Goods Sold.
Aug. 22 Appeal, Corp. dishonoured its note at maturity; the business converted the
maturity value of the note to an account receivable.
Nov. 16 Loaned \)17,000 cash to Crosby, Inc., receiving a 90-day, 16% note.
Dec. 5 Collected in full on account from Appeal, Corp.
31 Accrued the interest on the Crosby, Inc. note.
Record the transactions in the journal of Sleepy Recliner Chairs. Explanations are not
required. (Round to the nearest dollar.)
Recording credit sales and collections
Steller Corporation had the following transactions in June:
Jun .1 | Sold merchandise inventory on account to Carter Company, \(1,575. |
6 | Sold merchandise inventory for cash, \)550 |
12 | Received cash from Carter Company in full settlement of its accounts receivable |
20 | Sold merchandise inventory on account to Iris Company, \(765 |
22 | Sold merchandise inventory on account to Driver Company, \)230 |
28 | Received cash from Iris Company in partial settlement of its accounts receivable, \(300 |
Requirements
1. Journalize the transactions. Ignore Cost of Goods Sold. Omit explanations.
2. Post the transactions to the general ledger and the accounts receivable subsidiary
ledger. Assume all beginning balances are \)0.
3. Verify the ending balance in the control Accounts Receivable equals the sum of the
balances in the subsidiary ledger.
What do the days’ sales in receivables indicate, and how is it calculated?
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