Chapter_9_Solutions

# Chapter_9_Solutions - Chapter 9 Receivables Quick Check Answers 1 d 2 d Explanations 4 b Ending Allowance for Uncollectibles is \$2,000(Beginning

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Chapter 9 Receivables Quick Check Answers: 1. d 3. a 5. a 7. c 9. b 2. d 4. b 6. d 8. b 10. c Explanations: 4. b. Ending Allowance for Uncollectibles is \$2,000 (Beginning balance \$1,100 + Expense \$3,000 – Write offs \$2,100) 5. a. Net realizable value of Accounts Receivable is \$18,000 (\$20,000 – Allowance \$2,000) 7. c. Note receivable is \$10,000 Interest receivable is \$400 (\$10,000 × .08 × 6/12) 8. b. Income statement reports Interest revenue of \$400 (\$10,000 × .08 × 6/12) 9. b. Acid-test ratio is 1.00 [(Cash \$10,000 + Receivables \$50,000) / Total current liabilities \$60,000] 10. c Days’ sales in average receivables = 30, computed as follows: One day’s sales = \$2,000 (Sales of \$730,000 / 365 days) Days’ sales in average receivables: Average receivables [(\$50,000 + \$70,000) / 2]…. \$60,000 One day’s sales……………………………………. .. ÷ \$2,000 Days’ sales in average receivables……………… 30 days Chapter 9 Receivables 79

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Short Exercises (5 min.) S 9-1 Req. 1 The accountant should not handle the company’s cash . With cash-handling duties, Delaney can steal cash and hide the theft by writing off a customer’s account as uncollectible. (5 min.) S 9-2 The credit department must have no cash-handling duties. This means that credit-department employees must not be custodians of any cash funds. A dishonest credit-department employee who also handles cash can pocket the money received from a customer and label the customer’s account as uncollectible. The accounting department then writes off the customer’s account, and the company stops billing the customer. Accounting 7/e Solutions Manual 80
(5 min.) S 9-3 Journal DATE ACCOUNTS AND EXPLANATIONS DEBIT CREDIT Uncollectible-Account Expense (\$350,000 × .02) 7,000 Allowance for Uncollectible Accounts 7,000 Balance sheet: Accounts receivable \$40,000 Less Allowance for uncollectible accounts (7,000 ) Accounts receivable, net \$33,000 (5-10 min.) S 9-4 Journal DATE ACCOUNTS AND EXPLANATIONS DEBIT CREDIT 1. Accounts Receivable 400,000 Sales Revenue 400,000 2. Cash 420,000 Accounts Receivable 420,000 3. Allowance for Uncollectible Accounts 6,000 Accounts Receivable 6,000 4. Uncollectible-Account Expense (\$400,000 × .02) 8,000 Allowance for Uncollectible Accounts 8,000 Chapter 9 Receivables 81

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(10 min.) S 9-5 Journal DATE ACCOUNTS AND EXPLANATIONS DEBIT CREDIT 2007 Dec. 31 Uncollectible-Account Expense (\$2,200 \$2,000) 200 Allowance for Uncollectible Accounts 200 AGING SCHEDULE : Age of Accounts Receivable 0-60 Days Over 60 Days Total Receivables Amount receivable \$70,000 \$4,000 \$74,000 % uncollectible × 2% × 20% Amount uncollectible \$1,400 + \$800 = \$ 2,200 Allowance for Uncollectible Accounts Bal. before adjustment 2,000 Uncollectible- account expense X = 200 Balance needed based on aging schedule 2,200 Accounting 7/e Solutions Manual 82
(10 min.) S 9-6 Journal DATE ACCOUNTS AND EXPLANATIONS DEBIT CREDIT 1. Uncollectible-Account Expense 2,000 Accounts Receivable

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## This note was uploaded on 05/05/2010 for the course BUSINESS 71395 taught by Professor Brown during the Spring '09 term at Miss. College.

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Chapter_9_Solutions - Chapter 9 Receivables Quick Check Answers 1 d 2 d Explanations 4 b Ending Allowance for Uncollectibles is \$2,000(Beginning

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