Exercise 7-5
Requirement 1
Sales price = 100 units x 500 = 50,000 x 70% = 35,000
November 17, 2006 Accounts receivable ....................................................... 35,000 Sales revenue .............................................................. 35,000 November 26, 2006 Cash (98% x 35,000) .......................................................... 34,300 Sales discounts (2% x 35,000) ........................................... 700 Accounts receivable ................................................... 35,000 Requirement 2
November 17, 2006 Accounts receivable ....................................................... 35,000 Sales revenue .............................................................. 35,000 December 15, 2006 Cash ................................................................................ 35,000 Accounts receivable ................................................... 35,000 Solutions Manual, Vol.1, Chapter 7
? The McGraw-Hill Companies, Inc., 2007
7-5
Exercise 7-5 (concluded) Requirement 3
Requirement 1:
November 17, 2006 Accounts receivable ........................................................ 34,300 Sales revenue (98% x 35,000) ........................................ 34,300 November 26, 2006 Cash ................................................................................. 34,300 Accounts receivable .................................................... 34,300
Requirement 2:
November 17, 2006 Accounts receivable ........................................................ 34,300 Sales revenue (98% x 35,000) ........................................ 34,300 December 15, 2006 Cash ................................................................................. 35,000 Accounts receivable .................................................... 34,300 Interest revenue ........................................................... 700 ? The McGraw-Hill Companies, Inc., 2007 7-6
Intermediate Accounting, 4/e
Exercise 7-6
Requirement 1 To record the write-off of receivables.
Allowance for uncollectible accounts ............................ 20,000 Accounts receivable ................................................... 20,000
To record the collection of a receivable previously written off. Accounts receivable ....................................................... Allowance for uncollectible accounts ........................ Cash ................................................................................ Accounts receivable ................................................... 1,200 1,200
1,200 1,200
Allowance for uncollectible accounts: Balance, beginning of year Deduct: Receivables written off
Add: Collection of receivable previously written off Balance, before adjusting entry for 2006 bad debts Required allowance: 10% x 625,000 Bad debt expense
To record bad debt expense for the year.
EUR 32,000 (20,000) 1,200 13,200 (62,500) 49,300
Bad debt expense ............................................................ 49,300 Allowance for uncollectible accounts ........................ 49,300 Requirement 2
Current assets: Accounts receivable, net of 62,500 in allowance for uncollectible accounts
EUR 562,500
? The McGraw-Hill Companies, Inc., 2007
7-7
Solutions Manual, Vol.1, Chapter 7
Exercise 7-7
Requirement 1 67,500 (1.5% x 4,500,000)
Requirement 2 Allowance for uncollectible accounts Balance, beginning of year Add: Bad debt expense for 2006 (1.5% x 4,500,000) Less: End-of-year balance Accounts receivable written off
MYR
45,000 67,500 (40,000) 72,500 Requirement 3 MYR 72,500 — the amount of accounts receivable written off.
Exercise 7-8
($ in millions)
Allowance for uncollectible accounts: Balance, beginning of year Add: Bad debt expense Less: End of year balance Write-offs during the year Accounts receivable analysis:
Balance, beginning of year ($5,196 + 242) Add: Credit sales Less:Write-offs*
Less: Balance end of year ($5,890 + 166) Cash collections
$ 5,438 36,835 (120) (6,056) $36,097 $242 44 (166) $120*
? The McGraw-Hill Companies, Inc., 2007 7-8
Intermediate Accounting, 4/e