S5_PLE_Recievables

S5_PLE_Recievables - ACCTG 620 | Fall 2011 S5 PLE –...

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Unformatted text preview: ACCTG 620 | Fall 2011 S5 PLE – Receivables Name: _________________ Scenario: Retro Corp. (RC) is a merchandising company specializing in replica home furnishings and fixtures from the 20th century. RC had the following balances related to accounts receivable on December 31, 2011. Account Accounts receivable Allowance for doubtful accounts Accounts receivable, net 12/31/2011 $10,000 (750) $ 9,250 During 2012, RC had credit sales of $60,000 and collections on credit sales of $55,000. In addition, $1,000 of accounts receivable were written off as uncollectible, brining the allowance for doubtful accounts to a $250 debit balance. The following table summarizes the aging of RC’s accounts receivable at December 31, 2012: Accounts receivable1 Est. % uncollectible Est. amount uncollectible 1 Total $14,000 $ 1,060 0-30 $9,000 2% $ 180 Days Outstanding 31-60 61-90 $3,000 $1,000 6% 20% $ 180 $ 200 > 90 $1,000 50% $ 500 10,000 + (60,000 – 55,0000 – 1,000) = 14,000 Part 1: Estimate the uncollectible receivables and prepare the adjusting journal entries to record bad debt expense for the following three methods. Percentage of sales (POS): 3% of credit sales is estimated to be uncollected. Account Dr Cr Simple Percentage-of-Outstanding-Receivables (SPOR): 6% of outstanding accounts receivable is estimated to be uncollected. Account ACCTG 620 | Fall 2011 Dr S5 PLE Cr Page 1 Aged Percentage-of-Outstanding-Receivables (APOR). Account Dr Cr Part 2: Present the balance sheet accounts related to accounts receivable on December 31, 2012 for each of the three methods Account POS Estimation Method SPOR APOR Accounts receivable Allowance for doubtful accounts Accounts receivable, net Part 3: In January, 2013, RC assigned accounts receivable with a net carrying value of $10,000 to Factor Inc. in exchange for $7,000 cash. Interest of 1% per month is charged on the outstanding balance of the obligation. Collections on accounts receivable are to be remitted to Factor Inc. on a monthly basis. RC remitted $2,000 (including interest) to Factor from the January collections. Prepare the following journal entries to record these transactions in RC’s books. Account Dr Cr Dr Cr To record the assignment of the receivables Account To record the receipt of cash from assignment ACCTG 620 | Fall 2011 S5 PLE Page 2 Account Dr Cr To record the remittance of $2,000 to Factor Inc. Part 4: Present the balance sheet accounts related to the accounts receivable assignment based the above transactions. Account Accounts receivable assigned (net) Less: Note payable on accounts receivable assigned Equity in accounts receivable assigned ACCTG 620 | Fall 2011 S5 PLE Page 3 ...
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This note was uploaded on 04/04/2012 for the course ACCTG 620 taught by Professor Staff during the Spring '08 term at San Diego State.

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