Professional Documents
Culture Documents
CH 7
CH 7
:Example 1
Assume that UE CO. on July 1, 2017, sells merchandize on account to UK company for 8000$
terms 2/10, n/30. On July 5, UK returns merchandize with sales price of 800$ to UK CO. on
.July 11, UK receives the payment from UK company for the balance due
Answer
Date Explanation Dr Cr
July 1 Accounts receivable 8000
Sales revenue 8000
July 5 Sales returns and allowance 800
Accounts receivable 800
July 11 Cash 7.056
Sales discount 144
Accounts receivable 7.200
:Example 2
Assume that on December, 31, 2017, 3.950$ account receivable from R.B company has been
determined to be uncollectible. The entry to write off the account
Date Explanation Dr Cr
Dec 31 Bad debt expense 3.950
Account receivable 3.950
:Example 3
Assume that the R.B company account of 3.950$ written off on Dec 31 is later collected on
.March 10, 3017
Required: prepare the entry to record the reinstatement and the receipt of cash
Answer
Date Explanation Dr Cr
March 10 Accounts receivable 3.950
Bad debt expense 3.950
March 10 Cash 3.950
Accounts receivable 3.950
:Example 4
Assume that R.S Company began operations July 1. As of the end of its accounting period on
December 31, 2016, R.S has an accounts receivable balance of 300.000$. This balance
includes some past due accounts. Based on industry averages, R.S estimates that 40.000$ of
.the December 31, accounts receivable will be uncollectable
Answer
Date Explanation Dr Cr
Dec 31 Bad debt expense 40.000
Allowance for doubtful account 40.000
receivable
:Example 5
Assume that the financial vice-president of R.S company authorizes a written off of the
.3000$ balance owed by Larsen on December 31, 2016
Answer
Date Explanation Dr Cr
Dec 31 Allowance for doubtful account 3000
Account receivable 3000
:Example 6
Assume that Larsen`s account of 3000$ which was written off on December 31, 2016, is
.collected later on march 10, 2017
Required: prepare the entry to record the reinstatement and the collection
Answer
Date Explanation Dr Cr
Mar 10 Accounts receivable 3000
Allowance for doubtful account 3000
Date Explanation Dr Cr
Mar 10 Cash 3000
Account receivable 3000
:Example 7
Assume that R.S company has 2.000.000$ of receivables to KZ. KZ assesses a service charge
.of 2% the amount receivable sold
Answer
Date Explanation Dr Cr
Dec 31 Cash 1.960.000
Service charge expense 40.000
Account receivable 2.000.000
:Example 8
Assume that Orion furniture factors 1.200.000$ of receivables to federal factors. Federal
.factors assess a service charge of 2% of the amount of receivables sold
Answer
Date Explanation Dr Cr
Dec 31 Cash 1.176.000
Service charge expense 24.000
Account receivable 1.200.000
:Example 9
Reem purchases 4000$ of compact discs for her restaurant from Haifa music co. Using her
visa first bank card. First bank charges a service fee of 3%
Answer
Date Explanation Dr Cr
Dec 31 Cash 3.880
Service charge expense 120
Sales revenue 4000