CHAPTER 4

Problem 4-2

a. Accounts receivable – January 1 600,000

Charge sales 6,000,000
Total 6,600,000
Less: Collections from customers 5,300,000
Write off 35,000
Merchandise returns 40,000
Allowances to customers 25,000 (5,400,000)
Accounts receivable – December 31 1,200,000

b. Subscription receivable 150,000

Deposit on contract 120,000
Claim receivable 60,000
Advances to employees 10,000
Advances to affiliated 100,000
Advances to supplier 50,000
Accounts receivable 490,000

c. Accounts receivable 1,200,000

Claim receivable 60,000
Advances to employees 10,000
Advances to supplier 50,000
Total trade and other receivables 1,320,000

d. The subscriptions receivable should be presented as deduction from subscribed share

capital.

The deposit on contracts should be classified as noncurrent and presented as other

noncurrent asset.

The advances to affiliates should be classified as noncurrent and presented as long-term

investment.
Problem 4-4

1. Accounts receivable 4,000,000

Sales 4,000,000

2. Cash 1,470,000
Sales discount 30,000
Accounts receivable 1,500,000

3. Cash 1,000,000
Accounts receivable 1,000,000

4. Sales return 100,000

Accounts receivable 100,000

5. Sales return 20,000

Allowance for sales return 20,000

Problem 4-8 Answer A

Trade accounts 2,000,000

Allowance for doubtful accounts (100,000)
Claim receivable 300,000
Total trade and other receivables 2,200,000

Problem 4-9 Answer B

Accounts receivable – January 1 1,300,000

Credits sales 5,500,000
Collections from customers (5,500,000)
Sales return ( 150,000)
Accounts written off ( 100,000)
Accounts receivable – December 31 1,550,000
Allowance for doubtful accounts ( 250,000)
Allowance for sales return ( 50,000)
Net realizable value 1,250,000
Problem 4-12

Question 1 Answer B

Accounts receivable – January 1 560,000

Charge sales 5,250,000
Accounts written off but recovered 10,000
Total 5,820,000
Collections from customers (5,150,000)
Write off ( 35,000)
Merchandise returns ( 25,000)
Allowances to customers ( 10,000)
Accounts receivable – December 31 595,000

Accounts receivable – January 1 530,000

Credit balance of customer 30,000
Adjusted accounts receivable 560,000

Collections from customers 5,200,000

Overpayment ( 50,000)
Adjusted collections 5,150,000

Question 2 Answer C

Accounts receivable 595,000

Claim receivable (400,000 – 50,000) 350,000
Advances to supplier 300,000
Total trade and other receivables 1,245,000

Question 3 Answer C

Subscription receivable (1,000,000 – 200,000) 800,000

Deposit on contracts 500,000
Total long-term other receivables 1,350,000

Problem 4-14 5. D
6. C
1. D
7. D
2. D
8. C
3. A
9. A
4. C
10. C
Problem 4-15

1. A
2. A
3. A
4. D
5. B

CHAPTER 5

Problem 5-1

e. Credits sales (75% x 5,000,000) 3,750,000

Doubtful accounts (2% x 3,750,000) 75,000

Doubtful accounts 75,000

Allowance for doubtful accounts 75,000

f. Doubtful accounts (1% x 5,000,000) 50,000

Allowances for doubtful accounts 50,000

g. Required allowance 80,000

Less : Credits balance of allowance (20,000)
Doubtful accounts expense 60,000

Doubtful accounts 60,000

Allowance for doubtful accounts 60,000

h. Required allowance (10% x 500,000) 50,000

Less: Credit balance of allowance 20,000
Doubtful accounts expense 30,000

Doubtful accounts 30,000

Allowance for doubtful accounts 30,000
Problem 5-5

Requirement a

1. Accounts receivable 7,935,000

Sales 7,935,000
2. Cash 4,410,000
Sales discount 90,000
Accounts receivable (4,410,000 x 98%) 4,500,000
3. Cash 2,475,000
Sales discount 25,000
Accounts receivable (2,475,000 / 99%) 2,500,000
4. Accounts receivable 15,000
Allowance for doubtful accounts 15,000
Cash 15,000
Accounts receivable 15,000
5. Cash 1,100,000
Accounts receivable 1,100,000
(8,000,000 – 4,410,000 – 2,475,000 – 15,000)
6. Allowance for doubtful accounts 55,000
Accounts receivable 55,000
7. Sales return 30,000
Accounts receivable 30,000

Requirement b

Rate (60,000 / 1,500,000) 4%

Required allowance (4% x 1,250,000) 50,000

Allowance before adjustment 20,000
(60,000 + 15,000 – 55,000)
Increase in allowance 30,000

Doubtful accounts 30,000

Allowance for doubtful accounts 30,000

Requirement c

Accounts receivable – December 31 1,250,000

Allowance for doubtful accounts ( 50,000)
Net realizable value 1,200,000
Problem 5-6

Percent of Required
Amount uncollectible allowance
1. Not yet due 1,700,000 - -
1 – 30 days past due 1,200,000 5% 60,000
31 – 60 days past due 100,000 25% 25,000
61 – 90 days past due 150,000 50% 75,000
Over 90 days past due 1,200,000 100% 120,000
3,270,000 280,000

2. Allowance – January 1 170,000

Recoveries 30,000
Doubtful account expense (SQUEEZED) 345,000
Total 545,000
Less: Write off (235,000 + 30,000) (265,000)
Required allowance - December 31 280,000

3. Doubtful accounts expense 345,000

Allowance for doubtful accounts 345,000

4. Accounts receivable 3,270,000

Less: Allowance for doubtful accounts ( 280,000)
Net realizable value 2,990,000

Problem 5-9

1. Allowance – 1/1/2020 (1% x 2,800,000) 28,000

2. Allowance – 1/1/2020 28,000

Doubtful accounts recorded in 2020 (1% x 3,000,000) 30,000
Recovery 7,000
Total 65,000
Write off (27,000)
Allowance before adjustment 38,000

3. 300,000 x 1% 3,000
80,000 x 5% 4,000
60,000 x 20% 12,000
25,000 x 80% 20,000
Required allowance – 12/31/2020 39,000
 4. Doubtful accounts 1,000
Allowance for doubtful accounts (39,000 – 38,000) 1,000

Problem 5-12

Question 1 Answer A

Available discount (2% x 2,000,000) 40,000

Allowance for sales discount (50% x 40,000) 20,000

Question 2 Answer B

16 – 30 days (1,400,000 x 5%) 70,000

31 – 60 days ( 400,000 x 10%) 40,000
Over 60 days ( 200,000 x 50%) 100,000
Allowance for doubtful accounts 210,000

Question 3 Answer C

Accounts receivable 4,000,000

Allowance for doubtful accounts ( 210,000)
Allowance for sales discount ( 20,000)
Net realizable value 3,770,000

Problem 5-18

Question 1 Answer B

Credits sales Write offs Recoveries

2017 11,100,000 260,000 22,000
2018 12,250,000 295,000 37,000
2019 14,650,000 300,000 36,000
38,000,000 855,000 95,000

Rate = 855,000 – 95,000 = .02

38,000,000

Doubtful accounts expense for 2020 300,000

(2% x 15,000,000)
Question 2 Answer A

Allowance for doubtful accounts - January 1, 2020 80,000

Doubtful accounts expense for 2020 300,000
Recoveries in 2020 40,000
Total 420,000
Write off in 2020 (310,000)
Allowance for doubtful accounts - December 31, 2020 110,000

Question 3 Answer A

Accounts receivable – January 1, 2020 2,070,000

Credit sales in 2020 15,000,000
Collection from customers in 2020 (14,000,000)
Write off in 2020 ( 310,000)
Accounts receivable - December 31, 2020 2,760,000

Accounts receivable - December 31, 2020 2,760,000

Allowance for doubtful accounts – December 31, 2020 ( 110,000)
Net realizable value 2,650,000

Problem 5-21

1. C
2. A
3. A
4. B
5. C
6. D
7. A
8. A
9. D
10. B
 CHAPTER 6

Problem 6-1

2020

Jan. 1 Cash 1,000,000

Notes receivable 6,000,000
Land 5,000,000
Gain on sale of land 2,000,000

Dec. 31 Accrued interest receivable 720,000

Interest income (12% x 6,000,000) 720,000

2021

Dec. 31 Accrued interest receivable 806,000

Interest income (12% x 6,720,000) 806,000

2022

Jan. 1 Cash 7,526,000

Notes receivable 6,000,000
Accrued interest receivable 1,526,400

Problem 6-8 Answer A

First payment on January 1, 2020 600,000

Present value of remaining six payments (600,000 x 4.36) 2,616,000
Correct sales revenue 3,216,000

Problem 6-12 Problem 6-17

Question 1 Answer D 2,825,000 11. A

12. B
Question 2 Answer C 825,000
13. C
Question 3 Answer B 339,000 14. B
15. C
Question 4 Answer D 2,664,000
16. B
17. D
18. B
19. D
20. B