5th Edition

ISBN: 9780078025914

Author: Fred Phillips Associate Professor, Robert Libby, Patricia Libby

Publisher: McGraw-Hill Education

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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by t…

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable ari…

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Textbook Question

Chapter 8, Problem 8.1PA

Recording Accounts Receivable Transactions Using the Aging Method

Kraft Foods Group Inc. sells Oscar Mayer, Jell-O, Tassimo, and many other food brands. The company reported the following rounded amounts as of December 29, 2012 (all amounts in millions):

	Debits	Credits
Accounts Receivable	$1,120
Allowance for Doubtful Accounts		$ 30
Sales (assume all on credit)		18,300

Required:

1. Assume Kraft uses ½ of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.
2. Assume instead that Kraft uses the aging of accounts receivable method and estimates that $80 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at December 31, 2012, for recording Bad Debt Expense.
3. Repeat requirement 3, except this time assume the unadjusted balance in Kraft’s Allowance for Doubtful Accounts at December 31, 2012, was a debit balance of $20.
4. If one of Kraft’s main customers declared bankruptcy in 2013, what journal entry would be used to write off its $15 balance?

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Chapter 8, Problem 8.5CP

Chapter 8, Problem 8.2PA

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Chapter 8 Solutions

Fundamentals of Financial Accounting

Ch. 8 - What are the advantages and disadvantages of...Ch. 8 - Prob. 2Q Ch. 8 - Which basic accounting principles does the...Ch. 8 - Using the allowance method, is Bad Debt Expense...Ch. 8 - What is the effect of the write-off of...Ch. 8 - How does the use of calculated estimates differ...Ch. 8 - Prob. 7Q Ch. 8 - What is the primary difference between accounts...Ch. 8 - What are the three components of the interest...Ch. 8 - Prob. 10Q

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Solution Summary: The author explains that bad debt expense is a loss incurred from extending credit to the customers.

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