EX 8-3 Hermans Auto Supply distributes new and used automobile parts to local dealers throughout the Midwest.

Hermans credit terms are n/30. As of the end of business on July 31, the following accounts receivable were past due:

Account Bear Creek Body Shop First Auto Kaiser Repair Masters Auto Repair Richter Auto Sabols Uptown Auto Westside Repair & Tow

Due Date June 8 July 3 March 20 May 15 June18 April 12 May 8 May 31

Amount $3,000 2,500 500 1,000 750 1,800 500 1,100

Determine the Number of days each accounts is past due. EX 8-5 Intimacy Mattress Company has a past history of uncollectible accounts, as shown below. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule you schedule in Exercise 8-4. Age Class Not past due 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due EX 8-7 Kubota Co. is a wholesaler of office supplies. An aging of the companys accounts receivable on December 31, 2006, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows: Percentage Uncollectible 1% 4 8 20 40

Age Interval Not past due 1-30 days past due 31-60 days past due 61-90 days past due 91-180 days past due Over 180 days past due

Balance $450,000 110,000 51,000 12,500 7,500 5,500 $ 700.000

Percent Uncollectible 2% 4 6 20 60 80

Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31, 2006. EX 8-9 At the end of the current year, the accounts receivable account has a debit balance of $840,000 and net sales for the year total $7,150,000. Determine the amount of the adjusting entry to provide for doubtful account under each of the following assumptions: a. The allowance account before adjustment has a credit balance of $1,780. Uncollectible accounts expense is estimated at of 1% of net sales. b. The allowance account before adjustment has a credit balance of $2,750. An aging of the accounts in the costumer ledger indicates estimated doubtful accounts of $16,350. c. The allowance account before adjustment has a debit balance of $3,050. Uncollectible accounts expense is estimated at of 1% of net sales. d. The allowance account before adjustment has a debit balance of $3,050. An aging of the accounts in the costumers ledger indicates estimated doubtful account of $38,400.

EX 8-10 Anchor.com, a computer consulting firm, has decided to write off the $7,130 balance of an account owed by a costumer. Journalize the entry to record the write-off, (a) assuming that the allowance method is used, and (b) assuming that the direct write-off method is used. EX 8-12 Journalize the following transactions in the accounts of Graybeal Co., a hospital supply company that uses the direct write-off method of accounting for uncollectible receivables: July. 6. Sold merchandise on account to Dr. Jerry Jagers, $18,500. The cost of the merchandise sold was $11,100. Sept. 12. Received $9,000 from Dr. Jerry Jagers. and wrote off the remainder owed on the sale of July 6 as uncollectible.

Dec.

20.

Reinstated the account of Dr. Jerry Jagers that had been written off on September 12 and received $9,500 cash in full payment.

EX 8-13 During its first year of operations, OHara Automotive Supply Co. had net sales of $4,050,000, wrote off $112,350 of accounts as uncollectible using the direct write-off method, and reported net income of $212,800. If the allowance method of accounting for uncollectible had been used, 2% of net sales would have been estimated as uncollectible. Determine what the net income would have been if the allowance method had been used. EX 8-14 Using the data in Exercise 8-13, assume that the during second year of operations OHara Automotive Supply Co. had net sales of $4,800,000, wrote off $114,800 of accounts as uncollectible using the direct write-off method, and reported net income of $262,300. a. Determine what net income would have been in the second year if the allowance method (using 2% of net sales) had been used in both the first and second years. b. Determine what the balance of the allowance for doubtful accounts would have been at the end of the second year if the allowance method had been used in both the first and second years. EX 8-15 Determine the due date and the amount of interest due at maturity on the following notes: Date of Note June 2 August 30 October 1 March 6 May 20 Face Amount $8,000 18,000 12,500 10,000 6,000 Term of Note 90 days 120 days 60 days 60 days 60 days Interest Rate 6% 8 12 9 10

a. b. c. d. e.

EX 8-16 Magpie Interior Decorators issued a 120-day, 6% note for $24,000, dated April 10, to Peels Furniture Company on account. a. Determine the due date of the note. b. Determine the maturity value of the note. c. Journalize the entries to record the following: (1) receipt of the note by the payee, and (2) receipt of payment of the note at maturity. EX 8-18 The following selected transactions were completed by Cassidy Co., a supplier of elastic bands for clothing: 2005 Dec. 13. 31. 31.

Received from Visage Co., on account, a $25,000, 120-day, 6% note dated December 13. Recorded an adjusting entry for accrued interest on the note of December 13. Closed the interest revenue account. The only entry in this account originated from the December 31 adjustment.

2006 Apr. 12.

Received payment of note and interest from Visage Co.

Journalize the transactions. EX 8-19 Journalize the following transactions of Prairie Theater Productions: July 8. Oct. 6. Nov. 5. Received a $30,000, 90-day, 8% note dated July 8 from Pennington Company on account. The note is dishonored by Pennington Company. Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged to Pennington Company on October 6.

EX 8-20 Journalize the following transactions in the accounts of Blue Sky Co., which operates a riverboat casino: Mar. 1. Received a $15,000, 60-day, 5% note dated March 1 from Absaroka Co. on account.

18. Apr. 30. June 16. July 11.

Oct. 12.

Received a $12,000, 90-day, 9% note dated March 18 from Sturgis Co. on account The note dated March 1 from Absaroka Co. is dishonored, and the costumers account is charged for the note, including interest. The note dated March 18 from Sturgis Co. is dishonored, and the costumers account is charged for the note, including interest. Cash is received for the amount due on the dishonored note dated March 1 plus interest for 72 days at 8% on the total amount debited to Absaroka Co. on April 30. Wrote off against the allowance account the amount charged to Sturgis Co. on June 16 for the dishonored note dated March 18.

PR 8-1A The following transactions, adjusting entries, and closing entries were completed by Elko Contractors Co. during the year ended December 31, 2006: Mar. 15. Received 60% of the $18,500 balance owed by Bimba Co., a bankrupt business, and wrote off the remainder as uncollectible. Apr. 16. Reinstated the account of Ian Tom Miner, which had been written off in the preceding year as uncollectible. Journalized the receipt of $5,782 cash in full payment of Miners account. July 20. Wrote off the $5,500 balance owed by Martz Co., which has no assets. Oct. 31. Reinstated the account of Two Bit Saloon Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $6,100 cash in full payment of the account. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Asche Co., $950; Dorsch Co., $4,600; Krebs Distributors, $2,500; J. J. Levi, $1,200. 31. Based on an analysis of the $535,750 of accounts receivable, it was estimated that $13,700 will be uncollectible. Journalized the adjusting entry. 31. Journalized the entry to close the appropriate account to Income Summary. Instructions 1. Post the January 1 credit balance of $12,050 to Allowance for Doubtful Accounts. 2. Journalize the transactions and the adjusting and closing entries. Post each entry that affects the following T accounts and determine the new balances: 115 Allowance for Doubtful Accounts 313 Income Summary 718 Uncollectible Accounts Expense 3. Determine the expected net realizable value of the account receivable as of December 31.

4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of of 1% of the net sales of $3,100,000 for the year, determine the following: a. Uncollectible accounts expense for the year. b. Balance in the allowance account after the adjustment of December 31. c. Expected net realizable value of the account receivable as of December 31. PR 8-3A Kiohertz Company, a telephone service and supply company, has just completed its fourth year of operations. The direct write-off method of recording uncollectible accounts expense has been used during the entire period. Because of substantial increases in sales volume and the amount of uncollectible accounts, the firm is considering changing to the allowance method. Information is requested as to the effect that an annual provision of % of sales would have had on the amount of uncollectible accounts expense reported for each of the past four years. It is also considered desirable to know what the balance of Allowance for Doubtful Accounts would have been at the end of each year. The following data have been obtained from the accounts: Uncollectible Accounts Written Off $3,500 3,250 6,300 8,400 Year of Origin of Accounts Receivable Written Off as Uncollectible 1st 2nd 3rd 4th $3,500 1,900 $1,350 800 4,500 $1,000 1,800 2,550 $4,050

Year 1st 2nd 3rd 4th

Sales $850,000 $960,000 $1,200,000 $1,800,000

Instructions 1. Assemble the desired data, using the following column headings:

Uncollectible Accounts Expense Expense Expense Increase (Decrease) Balance of Based on in Amount of Allowance Account, Year Actually Reported Estimate Expense End of Year 2. Experience during the first four years of operations indicated that the receivables were either collected within two years or had to be written off as uncollectible. Does the estimate of % of sales appear to be reasonably close to the actual experience with uncollectible accounts originating during the first two years? Explain.

PR 8-4A Matrix Co. wholesales bathroom fixtures. During the current fiscal year, Matrix Co. received the following notes: Date March 7 June 18 Aug. 30 Oct. 31 Nov. 19 Dec. 23 Face Amount $24,000 16,800 10,200 27,000 12,000 16,000 Term 60 days 30 days 120 days 60 days 60 days 30 days Interest Rate 6% 9 6 9 6 9

1. 2. 3. 4. 5. 6.

Instructions 1. Determine for each note (a) that due date and (b) the amount of interest due at maturity, identifying each note by number. 2. Journalize the entry to record the dishonor of Note (3) on its due date. 3. Journalize the adjusting entry to record the accrued interest on Notes (5) and (6) on December 31. 4. Journalize the entries to record the receipt of the amounts due on Notes (5) and (6) in January.

PR 8-5A The following data relate to notes receivable and interest for Clyde Park Optic Co., a cable manufacturer and supplier. (All notes are dated as of the day are received.) June 4. Received a $18,800, 9%, 60-day note on account. July 15. Received a $27,000, 10%, 120-day note on account. Aug 3. Received a $19,082 on note of June 4. Sept. 1. Received a $24,000, 9%, 60-day note on account. Oct. 31. Received a $24,360, on note of September 1. Nov. 5. Received $9,600, 7%, 30-day note on account. 12. Received $27,900 on note of July 15. 30. Received a $15,000, 10%, 30-day note on account. Dec. 5. Received $9,656 on note of November 5. 30. Received $15,125 on note of November 30. Instructions Journalize the entries to record the transactions.

PR 8-6A The following were selected from among the transactions completed by Rimrock Co. during the current year. Rimrock Co. sells and installs home and business security system. Jan. 10. Loaned $12,000 cash to Brenda Norby, receiving a 90-day, 8% note. Feb. 4. Sold merchandise on account to Emerson and Son., $24,000. The cost of the merchandise sold was $14,400. 12. Sold merchandise on account to Gwyn Co., $25,000. The cost of merchandise sold was $15,000. Mar. 6. Accepted a 60-day, 6% note for $24,000 from Emerson and Son on account. 14. Accepted a 60-day, 12% note for $25,000 from Gwyn Co. on account. Apr. 10. Received the interest due from Brenda Norby and a new 90-day, 9% note as a renewal of the loan of January 10. (Record both the debit and the credit to the notes receivable account). May 5. Received from Emerson and Son the amount due on the note of March 6. 13. Gwyn Co. dishonored its note dated March 14. June 12. Received from Gwyn Co. the amount owed on the dishonored note, plus interest for 30 days at 12% computed on the maturity value of the note. July 9. Received from Brenda Norby the amount due on her note of April 10. Aug. 24. Sold merchandise on account to Haggerty Co., for $10,200. The cost of merchandise sold was $6,000. Sept. 3. Received from Haggerty Co. the amount due on the invoice of August 24, less 1% discount. Instructions Journalize the transactions. Round to the nearest dollar.