Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 2, Problem 2.10E
• LO2–4, LO2–5
The Eldorado Corporation’s controller prepares adjusting entries only at the end of the fiscal year. The following adjusting entries were prepared on December 31, 2018:
| Debit | Credit | |
| Interest expense | 7,200 | |
| Interest payable | 7,200 | |
| Rent expense | 35,000 | |
| Prepaid rent | 35,000 | |
| Interest receivable | 500 | |
| Interest revenue | 500 |
Additional information:
1. The company borrowed $120,000 on March 31, 2018. Principal and interest are due on March 31, 2019. This note is the company’s only interest-bearing debt.
2. Rent for the year on the company’s office space is $60,000. The rent is paid in advance.
3. On October 31, 2018, Eldorado lent money to a customer. The customer signed a note with principal and interest at 6% due in one year.
Required:
Determine the following:
1. What is the interest rate on the company’s note payable?
2. The 2018 rent payment was made at the beginning of which month?
3. How much did Eldorado lend its customer on October 31?
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QUESTION 9
As at 30 March 2020 , the accounts receivable balance is $10,000. The allowance for doubtful account balance is $200(credit balance).
The management determined to write off an accounts receivable of $400 and accounting entries (following IFRS) were recorded on 30 March 2020.
At 31 March 2020. The management estimated that 8% of the outstanding accounts receivable balance is uncollectible. The adjusting entries for bad debt expense to be prepared on 31 March 2020 is $____________.
(Assumption: the company prepares the financial statements on an annual basis)
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Allowance for Doubtful Accounts has a debit balance of $2,300 at the end of the year (before adjustment). The company prepares an analysis of customers' accounts and estimates the amount of uncollectible accounts to be $31,900. Which of the following adjusting entries is needed to record the Bad Debt Expense for the year?
a.debit Allowance for Doubtful Accounts, $29,600; credit Bad Debt Expense, $29,600
b.debit Allowance for Doubtful Accounts, $34,200; credit Bad Debt Expense, $34,200
c.debit Bad Debt Expense, $29,600; credit Allowance for Doubtful Accounts, $29,600
d.debit Bad Debt Expense, $34,200; credit Allowance for Doubtful Accounts, $34,200
Al Hajar Co. provides you the following account balances for the year ended on 31 December 2019.
Sales Revenue OMR 100,000 Cr.
Accounts Receivable OMR 25,000 Dr.
Allowance for Doubtful accounts OMR 1000 Cr.
Scenario 1
Bad debts are estimated based on the aging schedule given below
Aging class
Receivable Balance (OMR)
Estimate % of uncollectible
0–30 days
15,000
10
31–60 days
5,000
15
61–90 days
3,500
20
Over 90 days
1,500
25
Actual bad debt - OMR 1,100 and amount recovered - OMR 800.
Scenario 2
Estimated amount of bad debts - 12% of receivables, Actual bad debt - OMR 1,500 and amount recovered later on - OMR 900.
Scenario 3
Estimated amount of bad debts - 3.5% of Sales, Actual bad debt - OMR 1,300 and amount recovered - OMR 1000.
Required:
For each scenario given above;
a)Estimate the uncollectible amounts.
b)Pass adjusting entry to record the estimated uncollectible.
c)Pass all the journal entries for actual write off and recovery…
Chapter 2 Solutions
Intermediate Accounting
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