Financial Accounting
Financial Accounting
5th Edition
ISBN: 9781259914898
Author: SPICELAND
Publisher: MCG
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Chapter 5, Problem 3PA

1.

To determine

Prepare the journal entry to record transactions of Company U for each date.

1.

Expert Solution
Check Mark

Explanation of Solution

DateAccount Title and ExplanationDebit ($)Credit ($)
June 12 ,2021Accounts receivable41,000
Service revenue41,000
(To record the service  provided on account)
September 17, 2021Cash25,000
Accounts receivable25,000
(To record the receipt of cash on account)
December 31, 2021Bad debt expense (1)7,200
Allowance for uncollectible accounts7,200
(To record the estimation of future bad debts)
March 4, 2022Accounts receivable56,000
Service Revenue56,000
(To record the services provided on account )
May 20, 2022Cash10,000
Accounts receivable10,000
(To record receipt of cash on account)
July 2, 2022Allowance for uncollectible accounts6,000
Accounts receivable6,000
(To record the writing-off of actual bad debts)
October 19, 2022Cash45,000
Accounts receivable45,000
(To record the  receipt of cash from customer on account)
December 31, 2022Bad debt expense (3)3,750
Allowance for uncollectible accounts3,750
(To record the estimation of future bad debts)

Table (1)

Working notes:

Calculate Estimate future bad debts On December 31, 2021:

Estimate future bad debts=[Accounts receivable×estimated percentage of uncollectible accounts]=$16000(2)×45%=$7,200

(1)

Calculate the amount of accounts receivable:

Accounts receivable=[Providing services on account on June 12, 2021Received cash from customers on account on September 17, 2021]=$41,000$25,000=$16,000

(2)

Calculate Estimate future bad debts On December 31, 2022:

Estimate future bad debts=[Accounts receivable×Estimated Percentage of uncollectible accountsBalance in allowance for uncollectible accounts after write off]=$11000(4)×45%$1,200(5)=$3,750

(3)

Calculate the amount of accounts receivable:

Accounts receivable=[Providing services on account on March 4, 2022Received cash from customers on account on October 19, 2022]=$56,000$45,000=$11,000

(4)

Calculate the balance in allowance for uncollectible accounts after written off:

[Balance in allowance for uncollectible accounts after write off]=[Allowance for uncollectible accounts on December 31,2021Write-off actual bad debts on July 2, 2022]=$7,200$6,000=$1,200

(5)

2.

To determine

Post the transactions to the following accounts: Cash, Accounts receivable, and Allowance for uncollectible accounts.

2.

Expert Solution
Check Mark

Explanation of Solution

Accounts receivable:

Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.

For 2021:

Cash account
DateParticularsDebitDateParticularsCredit
September 17, 2021Accounts receivable$25,000
December 31, 2021Balance (Balancing figure)$25000

Table (2)

For 2022:

Cash account
DateParticularsDebitDateParticularsCredit
January 1, 2022Beginning balance$25,000
May 20, 2022Accounts receivable$10,000
October 19, 2022Accounts receivable$45,000
December 31, 2022Balance (balancing figure)$80,000

Table (3)

For 2021:

Accounts receivable account
DateParticularsDebitDateParticularsCredit
June 12, 2021Service revenue$41,000September 17, 2021Cash$25000
December 31, 2021Balance (Balancing figure)$16,000

Table (4)

For 2022:

Accounts receivable account
DateParticularsDebitDateParticularsCredit
March 4, 2022Service revenue$56,000May 20, 2022Cash$10,000
July 2, 2022Allowance for uncollectible accounts$6,000
October 19, 2022Cash45,000
December 31, 2022Balance (balancing figure)$11,000

Table (5)

For 2021:

Allowance for uncollectible account
DateParticularsDebitDateParticularsCredit
December 31, 2021Bad debt expense$7,200

Table (6)

For 2022:

Allowance for uncollectible account
DateParticularsDebitDateParticularsCredit
July 2, 2022Accounts receivable$6,000December 31, 2022Bad debt expense$3,750
December 31, 2022Balance (balancing figure)$4,950

Table (7)

Accounts receivable:

Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.

3.

To determine

Calculate the net realizable value of accounts receivable at the end of 2021 and 2022.

3.

Expert Solution
Check Mark

Explanation of Solution

Calculate the net realizable value of accounts receivable at the end of 2021 and 2022:

Years20212022
Total accounts receivable$16,000$11,000
Less: Allowance for uncollectible accounts($7,200)($4,950)
Net realizable value$8,800$6,050

Table (8)

Conclusion

Hence, the net realizable value of Company U for the year 2021 is $8,800 and for the year 2022 is $6,050.

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Chapter 5 Solutions

Financial Accounting

Ch. 5 - Prob. 11SSQCh. 5 - Prob. 12SSQCh. 5 - 12. On May 1, 2021, Nees Manufacturing lends...Ch. 5 - Prob. 14SSQCh. 5 - Prob. 15SSQCh. 5 - Prob. 1AECh. 5 - Prob. 2AECh. 5 - Prob. 1RQCh. 5 - Prob. 2RQCh. 5 - Prob. 3RQCh. 5 - Prob. 4RQCh. 5 - Prob. 5RQCh. 5 - Prob. 6RQCh. 5 - Prob. 7RQCh. 5 - Prob. 8RQCh. 5 - Prob. 9RQCh. 5 - Prob. 10RQCh. 5 - Prob. 11RQCh. 5 - Prob. 12RQCh. 5 - Prob. 13RQCh. 5 - Prob. 14RQCh. 5 - Prob. 15RQCh. 5 - Prob. 16RQCh. 5 - Prob. 17RQCh. 5 - Prob. 18RQCh. 5 - Prob. 19RQCh. 5 - Prob. 20RQCh. 5 - Prob. 21RQCh. 5 - Prob. 22RQCh. 5 - Prob. 23RQCh. 5 - Prob. 24RQCh. 5 - Prob. 25RQCh. 5 - Prob. 1BECh. 5 - Prob. 2BECh. 5 - Prob. 3BECh. 5 - Prob. 4BECh. 5 - Prob. 5BECh. 5 - Prob. 6BECh. 5 - Prob. 7BECh. 5 - Prob. 8BECh. 5 - Prob. 9BECh. 5 - Calculate uncollectible accounts using the aging...Ch. 5 - Calculate uncollectible accounts using the aging...Ch. 5 - Use the direct write-off method to account for...Ch. 5 - Use the direct write-off method to account for...Ch. 5 - Use the direct write-off method to account for...Ch. 5 - BE5–15 Calculate the missing amount for each of...Ch. 5 - Calculate interest revenue on notes receivable...Ch. 5 - Prob. 17BECh. 5 - Prob. 18BECh. 5 - Prob. 19BECh. 5 - Prob. 1ECh. 5 - Prob. 2ECh. 5 - Record credit sale and cash collection with a...Ch. 5 - Prob. 4ECh. 5 - Prob. 5ECh. 5 - Prob. 6ECh. 5 - Establish an allowance for uncollectible accounts...Ch. 5 - Record the adjustment for uncollectible accounts...Ch. 5 - Prob. 9ECh. 5 - Record the adjustment for uncollectible accounts...Ch. 5 - Record the adjustment for uncollectible accounts...Ch. 5 - E5–12 Consider the following transactions...Ch. 5 - Prob. 13ECh. 5 - Prob. 14ECh. 5 - Prob. 15ECh. 5 - E5-16 Refer to the information in...Ch. 5 - Record notes receivable and interest revenue...Ch. 5 - E5–18 Below are amounts (in millions) from three...Ch. 5 - Compare the percentage-of-receivables method and...Ch. 5 - Compare the percentage-of-receivables method and...Ch. 5 - Prob. 21ECh. 5 - Prob. 22ECh. 5 - Calculate the amount of revenue to recognize...Ch. 5 - Prob. 2PACh. 5 - Prob. 3PACh. 5 - Prob. 4PACh. 5 - Prob. 5PACh. 5 - Prob. 6PACh. 5 - Prob. 7PACh. 5 - Prob. 8PACh. 5 - Prob. 9PACh. 5 - Prob. 1PBCh. 5 - Prob. 2PBCh. 5 - Prob. 3PBCh. 5 - Prob. 4PBCh. 5 - Compare the direct write-off method to the...Ch. 5 - P5–6B Wanda B. Rich is the CEO of Outlet Flooring,...Ch. 5 - Prob. 7PBCh. 5 - Prob. 8PBCh. 5 - Prob. 9PBCh. 5 - Prob. 1APCh. 5 - American Eagle Outfitters, Inc. AP5–2 Financial...Ch. 5 - Prob. 3APCh. 5 - Prob. 4APCh. 5 - Prob. 5APCh. 5 - Prob. 6APCh. 5 - Prob. 7APCh. 5 - Prob. 8AP
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