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Chapter 7: Question: E7-11 (page 366)

(Bad Debts—Aging) Danica Patrick, Inc. includes the following account among its trade receivables.

Hopkins Company

1/1

Balance forward

700

1/28

Cash (#1710)

$1,100

1/20

Invoice #1710

1,100

4/2

Cash (#2116)

1,350

3/14

Invoice #2116

1,350

4/10

Cash (1/1 Balance)

155

4/12

Invoice #2412

1,710

4/30

Cash (#2412)

1,000

9/5

Invoice #3614

490

9/20

Cash (#3614 and part of #2412)

790

10/17

Invoice #4912

860

10/31

Cash (#4912)

860

11/18

Invoice #5681

2,000

12/1

Cash (#5681)

1,250

12/20

Invoice #6347

800

12/29

Cash (#6347)

800

Instructions

Age the balance and specify any items that apparently require particular attention at year-end

Short Answer

Expert verified

The total balance of receivables is$1,705.

Step by step solution

01

Definition of Aging of Receivables

The process of sorting accounting receivables on the basis of time for which they are outstanding is known as the aging of receivables.

02

Aging of Balance

Date

Amount

Aging

Balance 1/1

$700-$155

$545

Over one year

4/12 (#2412)

$1,710-1,000-300

$410

8 months and 19 days

11/18$2,000-1,250

$750

1 month and 13 days

$1,705

All the invoices are paid by the company in full. The above three items must be investigated as to why their payments have not been made. The major concerns are opening balance and 2412.

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Most popular questions from this chapter

Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to balance per books, or (4) deducted from balance per books.

(a) Deposit in transit \(5,500.

(d) Outstanding checks \)7,422.

(b) Bank service charges \(25.

(e) NSF check returned \)377.

(c) Interest credited to Horton’s account $31.

Under IFRS, cash and cash equivalents are reported:

(a) the same as GAAP.

(b) as separate items.

(c) similar to GAAP, except for the reporting of bank overdrafts.

(d) always as the first items in the current assets section.

(Notes Receivable Journal Entries) On December 31, 2017, Oakbrook Inc. rendered services to Beghun Corporation at an agreed price of \(102,049, accepting \)40,000 down and agreeing to accept the balance in four equal installments of $20,000 receivable each December 31. An assumed interest rate of 11% is imputed.

Instructions

Prepare the entries that would be recorded by Oakbrook Inc. for the sale and the receipts and interest on the following dates (prepare an amortization schedule). (Assume that the effective-interest method is used for amortization purposes.)

(a) December 31, 2017.

(b) December 31, 2018.

(c) December 31, 2019.

(d) December 31, 2020.

(e) December 31, 2021.

Recent financial statements of General Mills, Inc. report net sales of \(12,442,000,000. Accounts receivable are \)912,000,000 at the beginning of the year and $953,000,000 at the end of the year. Compute General Mills’ accounts receivable turnover. Compute General Mills’ average collection period for accounts receivable in days.

Which of the following statements is true?

(a) The fair value option requires that some types of financial instruments be recorded at fair value.

(b) The fair value option requires that all noncurrent financial instruments be recorded at amortized cost.

(c) The fair value option allows, but does not require, that some types of financial instruments be recorded at fair value.

(d) The FASB and IASB would like to reduce the reliance on fair value accounting for financial instruments in the future.
See all solutions

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