Intermediate Accounting - - Chapter 7

Exercise 7-5

Requirement 1

Sales price = 100 units x 500 = 50,000 x 70% = 35,000

November 17, 2006 Accounts receivable ....................................................... 35,000 Sales revenue .............................................................. 35,000 November 26, 2006 Cash (98% x 35,000) .......................................................... 34,300 Sales discounts (2% x 35,000) ........................................... 700 Accounts receivable ................................................... 35,000 Requirement 2

November 17, 2006 Accounts receivable ....................................................... 35,000 Sales revenue .............................................................. 35,000 December 15, 2006 Cash ................................................................................ 35,000 Accounts receivable ................................................... 35,000 Solutions Manual, Vol.1, Chapter 7

? The McGraw-Hill Companies, Inc., 2007

7-5

Exercise 7-5 (concluded) Requirement 3

Requirement 1:

November 17, 2006 Accounts receivable ........................................................ 34,300 Sales revenue (98% x 35,000) ........................................ 34,300 November 26, 2006 Cash ................................................................................. 34,300 Accounts receivable .................................................... 34,300

Requirement 2:

November 17, 2006 Accounts receivable ........................................................ 34,300 Sales revenue (98% x 35,000) ........................................ 34,300 December 15, 2006 Cash ................................................................................. 35,000 Accounts receivable .................................................... 34,300 Interest revenue ........................................................... 700 ? The McGraw-Hill Companies, Inc., 2007 7-6

Intermediate Accounting, 4/e

Exercise 7-6

Requirement 1 To record the write-off of receivables.

Allowance for uncollectible accounts ............................ 20,000 Accounts receivable ................................................... 20,000

To record the collection of a receivable previously written off. Accounts receivable ....................................................... Allowance for uncollectible accounts ........................ Cash ................................................................................ Accounts receivable ................................................... 1,200 1,200

1,200 1,200

Allowance for uncollectible accounts: Balance, beginning of year Deduct: Receivables written off

Add: Collection of receivable previously written off Balance, before adjusting entry for 2006 bad debts Required allowance: 10% x 625,000 Bad debt expense

To record bad debt expense for the year.

EUR 32,000 (20,000) 1,200 13,200 (62,500) 49,300

Bad debt expense ............................................................ 49,300 Allowance for uncollectible accounts ........................ 49,300 Requirement 2

Current assets: Accounts receivable, net of 62,500 in allowance for uncollectible accounts

EUR 562,500

? The McGraw-Hill Companies, Inc., 2007

7-7

Solutions Manual, Vol.1, Chapter 7

Exercise 7-7

Requirement 1 67,500 (1.5% x 4,500,000)

Requirement 2 Allowance for uncollectible accounts Balance, beginning of year Add: Bad debt expense for 2006 (1.5% x 4,500,000) Less: End-of-year balance Accounts receivable written off

MYR

45,000 67,500 (40,000) 72,500 Requirement 3 MYR 72,500 — the amount of accounts receivable written off.

Exercise 7-8

($ in millions)

Allowance for uncollectible accounts: Balance, beginning of year Add: Bad debt expense Less: End of year balance Write-offs during the year Accounts receivable analysis:

Balance, beginning of year ($5,196 + 242) Add: Credit sales Less:Write-offs*

Less: Balance end of year ($5,890 + 166) Cash collections

$ 5,438 36,835 (120) (6,056) $36,097 $242 44 (166) $120*

? The McGraw-Hill Companies, Inc., 2007 7-8

Intermediate Accounting, 4/e