HOMEWORK – CHAPTER 8

BE8-3:
(a)
Jan. 24 Allowance for Doubtful Accounts 4,300
Accounts Receivable – Madonna Inc. 4,300
(Write-off of Madonna Inc. account)
(b)
Before Write-Off After Write-off
Accounts Receivable $700,000 $695,700
Allowance for doubtful accounts 25,000 20,700
Cash realizable value $675,000 $675,000

BE8-5:
(a)
Dec. 31 Bad Debt Expense 5,200
Allowance for Doubtful Accounts
5,200
( $ 400,000 ×2 %−$ 2,800)
(To record estimate of uncollectible accounts)
(b)
Dec. 31 Bad Debt Expense 8,900
Allowance for Doubtful Accounts
8,900
( $ 400,000 ×2 % +$ 900)
(To record estimate of uncollectible accounts)

E8-4:
(a)
Dec. 31 Bad Debt Expense 900
Accounts Receivable – Matisse 900
(To record write-off of Matisse account)
(b)
Dec. 31 Bad Debt Expense 6,700
Allowance for Doubtful Accounts
6,700
( $ 78,000 ×10 %−$ 1,100)
(To record estimate of uncollectible accounts)
(c)
Dec. 31 Bad Debt Expense 6,740
Allowance for Doubtful Accounts 6,740
 ( $ 78,000 ×8 %+ $ 500)
(To record estimate of uncollectible accounts)

E8-5:
(a)
Age of accounts Accounts receivable Estimated Estimated
Percentage Uncollectibles
Uncollectible
Current $65,000 2% $1,300
1 – 30 days past $12,900 5% $645
due
31 – 90 days past $10,100 30% $3,030
due
Over 90 days past $7,400 50% $3,700
due
Total $95,400 $8,675
(b)
Dec. 31 Bad Debt Expense ( $ 8,675−$ 2,100) 6,575
Allowance for Doubtful Accounts
6,575
( $ 8,675−$ 2,100)
(To record estimate of uncollectible accounts)
(c) Based on the data shown in the table, the amount of accounts receivale being past due in 2017
surpasses the amount of accounts receivable being past due in 2016. Therefore, there is an
increase in the amount of uncollectible accounts from 2016 to 2017, which implicates the
deterioration in the company’s financial health.

P8-6A:
Jan. 5 Accounts Receivable – Rian Company 4,000
Sales Revenue 4,000
(To record sales on account, terms n/30)

Feb. 2 Notes Receivable 4,000

Accounts Receivable – Rian Company 4,000
(To record acceptance of Rian Company’s note)

Feb. 12 Notes Receivable – Cato Company 12,000

Sales Revenue 12,000
 (To record sales to Cato Company by accepting its note)

Feb. 26 Accounts Receivable – Malcolm Company 5,200

Sales Revenue 5,200
(To record sales on account)

Apr. 5 Notes Receivable 5,200

Account Receivable – Malcolm Company 5,200
(To record acceptance of Malcolm Company’s note)

Apr. 12 Cash 12,200

Notes Receivable 12,000
2
Interest Revenue (12,000 ×10 % × )
12
200
(To record collection of Cato Company note and interest)

Jun. 2 Cash 4,120

Notes Receivable
4,000
4
Interest Revenue ( 4,000× 9 % × ) 120
12
(To record collection of Rian Company note and interest)

Jun. 15 Notes Receivable – Gerri Inc. 2,000

Sales Revenue 2,000
(To record sales to Gerri Inc. by accepting its note)