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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On August 1, Taylor Company lent $80,000 to L. King on a 90-day, 5% note.
12. Journalize for Taylor Company the lending of the money on August 1.
13. Journalize the collection of the principal and interest at maturity. Specify the date. Round interest to the nearest dollar.
Accounting for notes receivable and accruing interestCarley Realty loaned money and received the following notes during 2018.Note Date Principal Amount Interest Rate Term
(1) Apr. 1 $ 6,000 7% 1 year
(2) Sep. 30 12,000 6% 6 months
(3) Sep. 19 18,000 8% 90 days
Requirements
1. Determine the maturity date and maturity value of each note.
2. Journalize the entries to establish each Note Receivable and to record the collection ofprincipal and interest at maturity. Include a single adjusting entry on December 31, 2018, the fiscal year-end, to record accrued interest revenue on any applicable note.Explanations are not required. Round to the nearest dollar.
Dialex Watches completed the following selected transactions during 2018 and 2019:
2018
Dec. 31 Estimated that bad debts expense for the year was 3% of credit sales of
\(410,000 and recorded that amount as expense. The company uses the
allowance method.
31 Made the closing entry for bad debts expense.
2019
Jan. 17 Sold merchandise inventory to Marty White, \)400, on account. Ignore Cost of
Goods Sold.
Jun. 29 Wrote off Marty White’s account as uncollectible after repeated efforts to
collect from him.
Aug. 6 Received \(400 from Marty White, along with a letter apologizing for being
so late. Reinstated White’s account in full and recorded the cash receipt.
Dec. 31 Made a compound entry to write off the following accounts as uncollectible:
Barry Krisp, \)1,600; Maria Bryant, \(1,100; and Richard Renik, \)400.
31 Estimated that bad debts expense for the year was 3% on credit sales of
\(490,000 and recorded the expense.
31 Made the closing entry for bad debts expense.
Requirements
1.Open T-accounts for Allowance for Bad Debts and Bad Debts Expense, assuming
the accounts begin with a zero balance. Record the transactions in the general
journal (omit explanations), and post to the two T-accounts.
2.Assume the December 31, 2019, balance of Accounts Receivable is \)136,000. Show
how net accounts receivable would be reported on the balance sheet at that date.
What are some limitations of using the direct write-off method?
During August 2018, Lima Company recorded the following:
• Sales of \(133,300 (\)122,000 on account; \(11,300 for cash). Ignore Cost of Goods Sold.
• Collections on account, \)106,400.
• Write-offs of uncollectible receivables, \(990.
• Recovery of receivable previously written off, \)800.
Requirement:
1. Journalize Lima’s transactions during August 2018, assuming Lima uses the direct write-off method.
2. Journalize Lima’s transactions during August 2018, assuming Lima uses the allowance method
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