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9-1
Chapter 9
Accounting for
Receivables
Chapter
9-2 Accounting Principles, Ninth Edition
Study Objectives
Chapter
9-4
Types of Receivables
Chapter
9-5 SO 1 Identify the different types of receivables.
Accounts Receivable
Chapter
9-7 SO 2 Explain how companies recognize accounts receivable.
Recognizing Accounts Receivable
Chapter
9-8 SO 2 Explain how companies recognize accounts receivable.
Recognizing Accounts Receivable
Chapter
9-9 SO 2 Explain how companies recognize accounts receivable.
Recognizing Accounts Receivable
* ($500,000 – $27,000)
** [($500,000 – $27,000) X 2%]
Assets
Current Assets:
Cash $ 346
Accounts receivable 500
Less: Allowance for doubtful accounts 25 475
Merchandise inventory 812
Prepaid expenses 40
Total current assets 1,673
Assets
Current Assets:
Cash $ 346
Accounts receivable, net of $25 allowance
for doubtful accounts 475
Merchandise inventory 812
Prepaid expenses 40
Total current assets 1,673
May 11 (write-off)
Allowance for doubtful accounts 1,100
Accounts receivable 1,100
June 12 (recovery)
Accounts receivable 1,100
Allowance for doubtful accounts 1,100
Cash 1,100
Accounts receivable 1,100
Chapter SO 3 Distinguish between the methods and bases
9-18
companies use to value accounts receivable.
Valuing Accounts Receivable
Example Data
Credit sales $500,000
Estimated % of credit sales uncollectible 1.25%
Accounts receivable balance $72,500
Estimated % of A/R not collected 8%
Existing balance in Allowance for Doubtful Accounts:
Case 1 $150 (credit balance)
Case 2 $150 (debit balance)
Percentage of Sales
Case 1 Case 2
Existing balance (credit) (150) 150
Estimated uncollectible (6,250) (6,250)
Ending balance (6,400) (6,100)
Percentage of Receivables
Percentage of Receivables
Case 1 Case 2
Existing balance (credit) (150) 150
Required balance (credit) (5,800) (5,800)
Adjustment (5,650) (5,950)
Percentage of Receivables
Case 1 Case 2
Actual balance (credit) (150) 150
Desired balance (credit) (5,800) (5,800)
Adjustment (5,650) (5,950)
Summary
Percentage of Sales approach:
Focus on “Bad debt expense” estimate, existing
balance in the allowance account is ignored.
Method achieves a matching of cost and revenues.
Chapter
9-28 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Sale of Receivables
A factor buys receivables from businesses and then
collects the payments directly from the customers.
Chapter
9-29 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Cash 659,600
Service charge expense 20,400
Accounts receivable 680,000
Chapter
9-30 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Chapter
9-31 SO 4 Describe the entries to record the disposition of accounts receivable.
Disposing of Accounts Receivable
Cash 3,360
Service charge expense 140
Sales 3,500
Chapter
9-32 SO 4 Describe the entries to record the disposition of accounts receivable.
Notes Receivable
Chapter
9-33 SO 5 Compute the maturity date of and interest on notes receivable.
Notes Receivable
Chapter
9-34 SO 5 Compute the maturity date of and interest on notes receivable.
Notes Receivable
Chapter
9-35 SO 5 Compute the maturity date of and interest on notes receivable.
Recognizing Notes Receivable
E9-10 Orosco Supply Co. has the following transactions
related to notes receivable during the last 2 months of 2010.
Nov. 1 Loaned $15,000 cash to Sally Givens on a 1-year, 10%
note.
Dec. 11 Sold goods to John Countryman, Inc., receiving a
$6,750, 90-day, 8% note.
Dec. 16 Received a $4,000, 6-month, 9% note in exchange for
Bob Reber’s outstanding accounts receivable.
Dec. 31 Accrued interest revenue on all notes receivable.
Instructions
(a) Journalize the transactions for Orosco Supply Co.
Chapter
9-36 SO 6 Explain how companies recognize notes receivable.
Recognizing Notes Receivable
Chapter
9-38 SO 6 Explain how companies recognize notes receivable.
Recognizing Notes Receivable
Chapter
9-39 SO 6 Explain how companies recognize notes receivable.
Notes Receivable
Chapter
9-40 SO 7 Describe how companies value notes receivable.
Notes Receivable
Chapter
9-41 SO 8 Describe the entries to record the disposition of notes receivable.
Notes Receivable
Chapter
9-43 SO 8 Describe the entries to record the disposition of notes receivable.
Notes Receivable
Chapter
9-45 SO 8 Describe the entries to record the disposition of notes receivable.
Statement Presentation and Analysis
Presentation
Identify in the balance sheet or in the notes each
major type of receivable.
B/S Report short-term receivables as current assets.
Report both gross amount of receivables and
allowance for doubtful account.
Report bad debts expense and service charge
expense as selling expenses.
I/S
Report interest revenue under “Other revenues
and gains.”
Chapter
9-46 SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and Analysis
Analysis of Receivables
Illustration 9-15
Chapter
9-47 SO 9 Explain the statement presentation and analysis of receivables.
Statement Presentation and Analysis
Analysis of Receivables
Illustration 9-16
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Chapter
9-49