Chapter 8: Q13RQ (page 465)
When using the allowance method, how are accounts receivable shown on the balance sheet?
Answer
Particular | Amount $ |
Accounts receivables | $xx |
Less: Allowance for doubtful accounts | ($xx) |
Net realizable value | Xx |
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On June 1, 2018, Best Performance Cell Phones sold \(21,000 of merchandise to Anthony Trucking Company on account. Anthony fell on hard times and on July 15 paid only \)5,000 of the account receivable. After repeated attempts to collect, Best Performance finally wrote off its accounts receivable from Anthony on September 5. Six months later, on March 5, 2019, Best Performance received Anthony’s check for $16,000 with a note apologizing for the late payment.
Requirements
1. Journalize the transactions for Best Performance Cell Phones using the direct write-off method. Ignore Cost of Goods Sold.
2. What are some limitations that Best Performance will encounter when using the direct write-off method?
Question: Silver Clothiers reported the following selected items at April 30, 2018 (last year’s—2017—amounts also given as needed):
Accounts Payable | \( 328,000 | Accounts Receivable, net: | |
Cash | \) 573,720 | April 30, 2018 | \( 11,000 |
Merchandise Inventory: | April 30, 2017 | \) 165,000 | |
April 30, 2018 | \( 250,000 | Cost of Goods Sold | \) 1,200,000 |
April 30, 2017 | \( 210,000 | Short-term Investments | \) 148,000 |
Net Credit Sales Revenue | \( 3,212,000 | Other Current Assets | \) 100,000 |
Long-term Assets | \( 350,000 | Other Current Liabilities | \) 188,000 |
Long-term Liabilities | $ 130,000 |
Compute Silver’s (a) acid-test ratio, (b) accounts receivable turnover ratio, and (c) days’ sales in receivables for the year ending April 30, 2018. Evaluate each ratio value as strong or weak. Silver sells on terms of net 30. (Round days’ sales in receivables to a whole number.)
How does the percent-of-sales method compute bad debts expense?
Question: McKale Corporation has a three-month, $18,000, 9% note receivable from L. Peters that was signed on June 1, 2018. Peters defaults on the loan on September 1.
Journalize the entry for McKale to record the default of the loan
What is the expense account associated with the cost of uncollectible receivables called?
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