Professional Documents
Culture Documents
CHAPTER 9
In class exercise.
Sales on Credit
1. On July 1, TechCom had a credit sale of $950 to CompStore and a collection of $720 from
RDA Electronics from a prior credit sale.
2. On July 15, TechCom has $100 of credit card sales with a 4% fee, and its $96 cash is
received immediately on deposit.
Cash 96
Credit Card Expense 4
Sales 100
4. What are the two methods companies uses for computing bad debt expense?
5. TechCome determines on Jan 23 that it cannot collect $520 owed to its customer J Kent .
The entry for bad debt expense under direct write off method.
6. What is the allowance method for computing bad debt expense?
8. TechCom had credit sales of $300,000 during its first year of operations. At the end of
the first year, $20,000 of credit sales remained uncollected. Based on the experience of
similar businesses, TechCom estimated that $1,500 of its accounts receivable would be
uncollectible.
10. How do you compute bad debt expense using percent of sales method?
11. How do you compute bad debt expense using percent of receivable method?
12. What are notes receivable and how do you compute interest received?
13. To illustrate the recording for the receipt of a note, we use the $1,000, 90-day, 12%
promissory note. TechCom received this note at the time of a product sale to Julia
Browne. This transaction is recorded as shown above. (issuance of note entry)
14. J. Cook has a $600, 15%, 60-day note receivable due to TechCom on December 4.
Record the payment of the note on its maturity date (payment of the not entry)
At the end of the year, the M. I. Wright Company showed the following
selected account balances:
Required:
1. Assume the company estimates that 1% of all credit sales will not be
collected.
a. Prepare the proper journal entry to recognize the expense
involved.
b. Present the balances in Accounts Receivable and Allowance for
Doubtful Accounts as they would appear on the balance sheet.
Also show the net realizable Accounts Receivable.
2. Assume the company estimates that 5% of its accounts receivable
will never be collected.
a. Prepare the proper journal entry to recognize the expense
involved.
b. Present the balances in Accounts Receivable and Allowance for
Doubtful Accounts as they would appear on the balance sheet.
Also show the net realizable Accounts Receivable.