Accounts Receivable, Notes Receivable Beginning Balance in Accounts Receivable: $15,000 Beginning Balance in Allowance for Uncollectible...
Accounts Receivable, Notes Receivable
Beginning Balance in Accounts Receivable: $15,000
Beginning Balance in Allowance for Uncollectible Accounts is a debit of $120
You will need to prepare a t-account for accounts receivable and allowance for uncollectible (doubtful) accounts. Use a 360-day year to calculate interest.
1. Adjust the allowance for uncollectible accounts assuming that 10% of the balance accounts receivable will be written off in the coming year.
2. Derrick sends a note via carrier pigeon stating he will not be able to pay off his account. Write off the $270 account using the allowance method.
3. Archie audits Meredith’s accounting records for $2,000. ½ is paid in cash and the remainder put on account.
4. Torres calls and requests an extension on her accounts receivable. Her $5,000 account is transferred to a notes receivable with terms of 10% and 90 days.
5. Cristina dishonors her note receivable of $3,000. Terms were 60 days and 5% interest. Charge back to accounts receivable.
6. Alex brings $900 in cash by the office to pay his bill.
7. Derrick sends a check for $50.
8. Meredith pays $500 of the $1,000 she owes and the remaining $500 is put on a 30 day 15% note.
9. Adjustment: Recognize 30 days of the note in #4 and 15 days of the note in #8.
10. Cristina pays her account in full.
11. The bank sends a note stating Alex’s cash was counterfeit. Put back on his account.
12. Meredith dishonors her note. Write off the account.
13. Write off Alex’s account.
14. Based on the ending balance of accounts receivable, assume that 5% will be written off in the coming year and update the allowance account to reflect this amount.
Homework Answers
| Accounts Receivable | |||
| Account Title | Amount | Account Title | Amount |
| Beginning balance | $15,000 | Accounts receivable - Derrick | $270 |
| Audit fees - Meredith | $1,000 | Notes receivable - Torres | $5,000 |
| Notes receivable - Cristina | $3,025 | Cash - Alex | $900 |
| Bank - Alex | $900 | Bank - Derrick | $50 |
| Notes receivable - Meredith | $503 | Cash - Meredith | $500 |
| Notes receivable - Meredith | $500 | ||
| Cash - Cristina | $3,025 | ||
| Allowance for uncollectible debts-Meredith | $503 | ||
| Allowance for uncollectible debts- Alex | $900 | ||
| Ending balance | $8,780 | ||
| $20,428 | $20,428 | ||
| Allowance for Uncollectible Debts | |||
| Account Title | Amount | Account Title | Amount |
| Beginning balance | $120 | Bad debts | $1,620 |
| Accounts receivable - Derrick | $270 | Bad debts | $612 |
| Accounts receivable - Meredith | $503 | ||
| Accounts receivable - Alex | $900 | ||
| Bad debts | |||
| Ending balance | $439 | ||
| $2,232 | $2,232 | ||
| Notes Receivable | |||
| Account Title | Amount | Account Title | Amount |
| Beginning balance | $3,000 | Accounts receivable - Cristina | $3,025 |
| Interest income - Cristina | $25 | Accounts receivable - Meredith | $503 |
| Accounts receivable - Torres | $5,000 | ||
| Accounts receivable - Meredith | $500 | ||
| Interest income - Torres | $42 | ||
| Interest income - Meredith | $3 | ||
| Ending balance | $5,042 | ||
| $8,570 | $8,570 | ||
| Working notes | |||
| 1. | |||
| Opening balance of Allowance for uncollectible debts | $120 | ||
| Revised balance @ 10% of Accounts receivable balance of $ 15,000 | ($1,500) | ||
| Entry for Bad debts in allowance for uncollectible debts | $1,620 | ||
| 2. | |||
| Notes receivable from Cristina | $3,000 | ||
| Interest for 60 days @ 5% (since, it was dishonored) = ($ 3,000 * 5%) *60/360 | $25 | ||
| Total amount receivable from Cristina transferred to Accounts receivable | $3,025 | ||
| Since the amount of Notes receivable dishonored by Cristina was not transferred in the above mentioned | |||
| transactions, we would treat it as the beginning balance of Notes payable ledger | |||
| 3. | |||
| Value of notes receivable from Torres | $5,000 | ||
| Rate of interest on notes receivable | 10% | ||
| Period for which interest is charged (in days) | 30 | ||
| Interest income on notes receivable from Torres = ($ 5,000 *10%) *30/360 | $41.67 | ||
| Interest income rounded off | $42 | ||
| Value of notes receivable from Meredith | $500 | ||
| Rate of interest on notes receivable | 15% | ||
| Period for which interest is charged (in days) | 15 | ||
| Interest income on notes receivable from Torres = ($ 5,00 *15%) *15/360 | $3.13 | ||
| Interest income rounded off | $3 | ||
| 4. | |||
| Ending balance of Accounts receivable | $8,780 | ||
| Allowance for uncollectible debts @ 5% of ending balance of Accounts receivable | $439 | ||
| The ending balance of Allowance for uncollectible debts would be $ 439. Adjusting entry to arrive at the stated | |||
| balance would be made in the Bad debts account | |||
| 5. | |||
| Balance of Allowance for uncollectible debts before making entry allowance for ending balance | $173 | ||
| Required ending balance @ 5% of Accounts receivable of $ 8,780 | ($439) | ||
| Entry required to be done in bad debts account to arrive at the above mentioned ending balance | ($612) |
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