WEEK 7

CHAPTER 9 – RECEIVABLES
PRACTICE EXERCISES
Exercise 7.1

3D Games Co. wrote off the following accounts receivable as uncollectible for the year ending December 31:

June 8 Wrote off account of Peach, $7,400

Aug 14 Received $3,300 as partial payment on the $12,800 account of Yoshi. Wrote off the remaining

balance as uncollectible.

Oct 16 Received $7,400 from Peach, whose account had been written off on June 8. Reinstated the

account and recorded the cash receipt.

Dec 31 Wrote of the following accounts as uncollectible (record as one journal entry)

Customer Amount
Mario $ 11,550
Luigi 13,915
Toad 27,565
Bowser 19,460
Total $ 72,490

Requirements

a. Journalize the write-offs under the direct write-off method.

b. Journalize the transactions under the allowance method, assuming that the allowance account had a
beginning credit balance of $86,000 on January 1 and the company uses the analysis of receivables
method. 3D Games Co. prepared the following aging schedule for its accounts receivable:

Aging Class (Number of Receivables Balance on Estimated Percent of

Days Past Due) December 31 Uncollectible Accounts
0-30 days $ 225,000 1%
31-60 days 110,000 2
61-90 days 92,000 15
91-120 days 68,000 30
Over 120 days 87,000 60
Total Receivables $ 582,000

c. How much higher (lower) would 3D Games Co.’s net income have been under the allowance method
than under the direct write-off method?
Exercise 7.2

Prepare journal entries to record these transactions and events for Portmans

Year 1

Nov 1 Accepted a $5,400, 90-day, 8% note in granting Bardot a time extension on his past-due

account receivable.

Dec 31 Made an adjusting entry to record the accrued interest on the Bardot note.

Year 2

Jan 30 Received Bardot’s payment for principal and interest on the note dated November 1.

Feb 28 Accepted a $13,800, 30-day, 8% note in granting a time extension on the past-due account

receivable from Sheike Co.

Mar 1 Accepted a $6,800, 60-day, 12% note in granting Witcher a time extension on his

past-due account receivable.

30 The Sheike Co. dishonored its note.

Apr 30 Received payment of principal plus interest from Witcher for the March 1 note.

June 15 Accepted a $2,500, 72-day, 8% note in granting a time extension on the past-due account

receivable of Sportcraft.

21 Accepted a 9,900, 90-day, 8% note in granting Kingston a time extension on his past-due

account receivable.

Aug 26 Received payment of principal plus interest from Sportcraft for the June 15 note.

Sep 19 Received payment of principal plus interest from Kingston for the June 21 note.

Nov 30 Wrote off Sheike’s account against the Allowance for Doubtful Accounts.