Problem 6-5

a. Accounts receivable 775,000

Notes receivable 100,000
Installments receivable 300,000
Advances to suppliers 150,000
Advances to subsidiary 400,000
Claim receivable 15,000
Subscriptions receivable 300,000
Accrued interest receivable 10,000
Customer's credit balances 30,000
Advances from customers 20,000
Receivables 2,000,000
b. Accounts receivable 775,000
Allowance for doubtful accounts (50,000)
Notes receivable 100,000
Installments receivable 300,000
Advances to suppliers 150,000
Claim receivable 15,000
Subscriptions receivable 300,000
Accrued interest receivable 10,000
Total trade and other receivables 1,600,000
c. The advances to subsidiary should be classified as noncurrent and
presented as long-term investment.
The customers' credit balances and advances from customers should
be classified as current liabilities and included as part of
"trade and other payables".
Problem 6-6
a. Accounts receivable - January 1 600,000
Charge sales 6,000,000
Total 6,600,000
Less: Collections from customers 5,300,000
Writeoff 35,000
Merchandise returns 40,000
Allowances to customers 25,000 5,400,000
Accounts receivable - December 31 1,200,000
b. Subscriptions receivable 150,000
Deposit on contract 120,000
Claim receivable 60,000
Advances to employees 10,000
Advances to affiliates 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 deducted from subscribed share capital
The deposit on contract should be classified as noncurrent and presented non-current asset.
The advances to affiliates should be classified as noncurrent and presented as long-term investment.
The deposit on contract should be classified as noncurrent and presented non-current asset.
The advances to affiliates should be classified as noncurrent and presented as long-term investment.
Problem 6-7
Requirement 1
1. Accounts receivable 3,600,000
Sales 3,600,000
2. Notes receivable 400,000
Accounts receivable 400,000
3. Doubtful accounts 90,000
Allowance for doubtful accounts 90,000
4. Allowance for doubtful accounts 20,000
Accounts receivable 20,000
5. Sales return 15,000
Accounts receivable 15,000
6. Cash 2,450,000
Accounts receivable 2,450,000
7. Sales discount 45,000
Accounts receivable 45,000
8. Cash 150,000
Notes receivable 150,000
Requirement 2
Notes receivable 250,000
Requirement 3
Accounts receivable 670,000
Less: Allowance for doubtful accounts (70,000)
Net realizable value 600,000
Problem 6-8
FOB destination and freight collect FOB shipping point and freight collect
1. Accounts receivable 500,000 1. Accounts receivable
Freight out 10,000
Sales 500,000
Allowance for freight charge 10,000 2. Cash
Sales discount
2. Cash 475,000
Sales discount 15,000
Allowance for freight charge 10,000
Accounts receivable 500,000
FOB destination and freight prepaid FOB shipping point and freight prepaid
1. Accounts receivable 500,000 1. Accounts receivable
Freight out 10,000
Sales 500,000
Cash 10,000
2. Cash
2. Cash 485,000 Sales discount
Sales discount 15,000
Accounts receivable 500,000
FOB shipping point and freight collect
Accounts receivable 500,000
Sales 500,000
485,000
Sales discount 15,000
Accounts receivable 500,000
FOB shipping point and freight prepaid
Accounts receivable 510,000
Sales 500,000
Cash 10,000
495,000
Sales discount 15,000
Accounts receivable 510,000
Problem 6-9
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 6-10
July 1 Accounts receivable 50,000 July 1 Accounts receivable
Sales 50,000 Sales
2 Accounts receivable 200,000 2 Accounts receivable
Sales 200,000 Sales
12 Cash 196,000 12 Cash
Sales discount 4,000 Accounts receivable
Accounts receivable 200,000
30 Cash 50,000 30 Cash
Accounts receivable 50,000 Accounts receivable
Sales discount forfeited
Net method Gross method
Accounts receivable 49,000
49,000
Accounts receivable 196,000
196,000
196,000
Accounts receivable 196,000
50,000
Accounts receivable 49,000
Sales discount forfeited 1,000
Net method
Problem 6-11
a. Credit sales (75% x 5M) 3,750,000
Doubtful accounts (2% x 3.75M) 75,000
Doubtful accounts expense 75,000
Allowance for doubtful accounts 75,000
b. Doubtful accounts expense (1% x 5M) 50,000
Allowance for doubtful accounts 50,000
c. Required allowance 80,000
Less: Credit balance of allowance (20,000)
Doubtful accounts expense 60,000
Doubtful accounts expense 60,000
Allowance for doubtful accounts 60,000
d. Required allowance (10% x 500,000) 50,000
Less: Credit balance of allowance (20,000)
Doubtful accounts expense 30,000
Doubtful accounts expense 30,000
Allowance for doubtful accounts 30,000
Problem 6-12
a. Required allowance (5% x 600,000) 30,000
Add: Debit balance in allowance account 10,000
Doubtful accounts expense 40,000
Doubtful accounts 40,000
Allowance for doubtful accounts 40,000
b. Required allowance 50,000
Add: Debit balance in allowance account 10,000
Doubtful accounts expense 60,000
Doubtful accounts 60,000
Allowance for doubtful accounts 60,000
c. Doubtful accounts (2% x 1.9M) 38,000
Allowance for doubtful accounts 38,000
Problem 6-13
a. Doubtful accounts (3% x 8M) 240,000
Allowance for doubtful accounts 240,000
b. Doubtful accounts 170,000
Allowance for doubtful accounts 170,000
Allowance - January 1 100,000
Doubtful accounts (squeeze) 170,000
Recovery 20,000
Total 290,000
Accounts written off (130,000)
Allowance - December 31 (8% x 2M) 160,000
c. Doubtful accounts 210,000
Allowance for doubtful accounts 210,000
Allowance - January 1 100,000
Doubtful accounts (squeeze) 210,000
Recovery 20,000
Total 330,000
Accounts written off (130,000)
Allowance - December 31 200,000
Problem 6-14
Requirement a
1. Accounts receivable 7,000,000
Sales 7,000,000
2. Cash 2,450,000
Sales discount 50,000
Accounts receivable (2.45M / 98%) 2,500,000
3. Cash 3,900,000
Accounts receivable 3,900,000
4. Allowance for doubtful accounts 30,000
Accounts receivable 30,000
5. Accounts receivable 10,000
Allowance for doubtful accounts 10,000
Cash 10,000
Accounts receivable 10,000
6. Sales return 70,000
Accounts receivable 70,000
Requirement b
Doubtful accounts 40,000
Allowance for doubtful accounts 40,000
Rate = 40,000 /1M =4%
Allowance for doubtful accounts - December 31 (4% x 1.5M) 60,000
Less: Allowance before adjustment (20,000)
Doubtful accounts expense 40,000
Requirement c
Accounts receivable - December 31 1,500,000
Allowance for doubtful accounts (60,000)
Net realizable value 1,440,000
Problem 6-15
Requirement a
1. Cash 800,000
Accounts receivable 7,200,000
Sales (800,000 / 10%) 8,000,000
2. Cash 684,000
Sales discount (5% x 720,000) 36,000
Accounts receivable (10% x 7.2M) 720,000
3. Cash 5,940,000
Accounts receivable 5,940,000
4. Sales discount 10,000
Allowance for sales discount 10,000
5. Sales return 80,000
Accounts receivable 80,000
6. Allowance for doubtful accounts 60,000
Accounts receivable 60,000
Accounts receivable 10,000
Allowance for doubtful accounts 10,000
Cash 10,000
Accounts receivable 10,000
7. Doubtful accounts 70,000
Allowance for doubtful accounts 70,000
Required Allowance - December 31 (5% x 2.4M) 120,000
Less: Allowance before adjustment (50,000)
Doubtful accounts expense 70,000
Rate = 100,000 /2M = 5%
Requirement b
Accounts receivable 2,400,000
Less: Allowance for doubtful accounts 120,000
Allowance for sales discount 10,000 (130,000)
Net realizable value 2,270,000
Problem 6-16
Requirement a
1. Accounts receivable 2,600,000
Sales (3,070,000 - 470,000) 2,600,000
2. Cash (2,455,000 - 1,455,000) 1,000,000
Accounts receivable 1,000,000
3. Cash 1,455,000
Sales discount 45,000
Accounts receivable (1,455,000 / 97%) 1,500,000
4. Allowance for doubtful accounts 20,000
Accounts receivable 20,000
5. Cash 470,000
Sales 470,000
6. Sales returns and allowances 55,000
Accounts receivable 55,000
7. Sales returns and allowances 10,000
Cash 10,000
8. Accounts receivable 5,000
Allowance for doubtful accounts 5,000
Cash 5,000
Accounts receivable 5,000
9. Doubtful accounts expense 50,000
Allowance for doubtful accounts 50,000
Credit Sales 2,600,000
Less: Sales discount 45,000
Sales returns and allowances 55,000 (100,000)
Net credit sales 2,500,000
Doubtful accounts (2.5M x 2%) 50,000
Requirement b
Accounts receivable 625,000
Less: Allowance for doubtful accounts (60,000)
Net realizable value 565,000
Problem 6-17
A.
1. Accounts Receivable 7,935,000
Sales 7,935,000
2. Cash 4,410,000
Sales Discount 90,000
Accounts Receivable 4,500,000
3. Cash 2,475,000
Sales Discount 25,000
Accounts Receivable 2,500,000
4. Accounts Receivable 15,000
Allowance for Doubtful Accounts 15,000
Cash 15,000
Accounts Receivaable 15,000
5. Cash 900,000
Accounts Receivable 900,000
6. Allowance for Doubtful Accounts 55,000
Accounts Receivable 55,000
7. Sales Return 30,000
Accounts Receivable 30,000
B.
Accounts Rec. Jan 1 1,500,000
Sales 7,935,000
Recovery 15,000
Collections (8,000,000)
Sales discount (115,000)
Writeoff (55,000)
Sales return (30,000)
Accounts Rec. Dec 1 1,250,000
Rate: 60,000/1,500,000= 0.004
Allowance for Doubtful Accounts 50,000
1,250,000 x 0.004
Less: Allowance before adjustment (20,000)
Doubful accounts expense 30,000
C.
Accounts Rec. Dec. 31 1,250,000
Allowance for Doubful Accounts (50,000)
Net Realizable value 1,200,000
Problem 6-18
Amount Percent of Required
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 120,000 100% 120,000
3,270,000 280,000
2. Allowances - January 1 170,000
Receivables 30,000
Doubtful accounts (squeeze) 345,000
Total 545,000
Less: writeoff (235,000 + 30,000) (265,000)
Required allowance - December 31 280,000
3. Accounts receivable 3,270,000
Less: Allowance for doubtful accounts (280,000)
Net realizable value 2,990,000
Problem 6-19
1. 1,000,000 1% = 10,000
400,000 5% = 20,000
300,000 10% = 30,000
200,000 25% = 50,000
60,000 100% = 60,000
1,960,000 170,000
2. Allowance - January 1 90,000
Recoveries 20,000
Doubtful accounts (unknown) 200,000
Total 310,000
Less: writeoff (100,000 + 40,000) 140,000
Allowance - December 31 170,000
3. Doubtful accounts 20,000
Allowance for doubtful accounts 20,000
Correct amount 200,000
Recorded (2% x 9M) 180,000
Understatement 20,000
4. Accounts receivable - December 31 1,960,000
Less: Allowance for doubtful accounts 170,000
Net realizable value 1,790,000
Problem 6-20
2011 2012 2013 Total
1. Writeoff 26,000 29,000 30,000 85,000
Less: Recoveries (2,000) (3,000) (4,000) (9,000)
Net writeoff 24,000 26,000 26,000 76,000
Percentage to be used in computing the allowance = 76,000 / 3.8M = 2%
2. Credit sales for 2013 3,000,000
Multiply by bad debt percentage 2%
Provision for doubtful accounts 60,000
3. Accounts receivable - January 1, 2013 250,000
Add: Credit sales for 2013 3,000,000
Recoveries 5,000 3,005,000
Total 3,255,000
Less: Collections in 2013 2,615,000
Writeoff 40,000 2,655,000
Accounts receivable - December 31, 2013 600,000
4. Allowance for doubtful - Jan.1 20,000
Add: Doubtful accounts 2013 60,000
Recoveries 5,000 65,000
Total 85,000
Less: Writeoff (40,000)
Allowance for doubtful - Dec.31 45,000
Requirement 1 Requirement 4
Accounts Receivable-Dec 31, 2012 600,000 Required Allowance- Dec. 31 2013
Add: Sales for 2013 5,000,000 Add: Debit Balance before adjustments
Recovery of written off accounts 10,000 5,010,000 Total Increase in Allowance
Total 5,610,000
Less: Collections from Customers 4,360,000 Requirement 5
Accounts written off 50,000
Accounts settled by note 200,000 4,610,000 Doubtful Accounts
Accounts Receivable-Dec 31, 2013 1,000,000 Allowance for doubtful accounts
Requirement 2
Allowance for doubtful accounts-Dec 31,2012 30,000
Add: Recovery of written off accounts 10,000
Total 40,000
Less: Accounts written off 50,000
Allowance before adjustment- Dec. 31, 2013 (10,000)
Requirement 3
Required Allowance for doubtful accounts-Dec 31,2013
On Current Account 35,000
(700000 x 5%)
On Past Due Accounts 60,000
(300000 x 20%)
Total Required Allowance 95,000
Required Allowance- Dec. 31 2013 95,000
Add: Debit Balance before adjustments 10,000
Total Increase in Allowance 105,000
105,000
Allowance for doubtful accounts 105,000
Problem 6-23
1. Allowance - January 1, 2013 500,000
Doubtful accounts recorded (2% x 20M) 400,000
Recovery 50,000
Total 950,000
Less: Writeoff (300,000 + 100,000) (400,000)
Allowance before adjustment 550,000
2. 5,000,000 x 5% 250,000
2,000,000 x 10% 200,000
1,000,000 x25% 250,000
500,000 -100,000 x 75% 300,000
Required allowance - December 31, 2013 1,000,000
3. Doubtful account 450,000
Allowance for doubtful accounts 450,000
(1M - 550,000)
Problem 6-24
1. Allowance - 1/1/2013 (1% x 2.8M) 28,000
2. Allowance - 1/1/2013 28,000
Doubtful accounts recorded in 2013 (1% x 3M) 30,000
Recovery 7,000
Total 65,000
Writeoff (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 x80% 20,000
Required allowance - 12/31/2013 39,000
4. Doubtful account 1,000
Allowance for doubtful accounts 1,000
(39,000 - 38,000)