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Chap009 Solution Manual(1)

9 1 chapter 09 accounting for receivables quick

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Chapter 09 - Accounting for Receivables QUICK STUDIES Quick Study 9-1 (15 minutes) 1. Cash 9,500 Credit Card Expense ............................................... 500 Sales ................................................................... 10,000 To record credit card sales less fees. Cost of Goods Sold ................................................. 7,500 Merchandise Inventory ...................................... 7,500 To record cost of sales. 2. Accounts Receivable—Credit Card Cos ................ 2,880 Credit Card Expense ............................................... 120 Sales ................................................................... 3,000 To record credit card sales less fees. Cost of Goods Sold ................................................. 1,500 Merchandise Inventory ...................................... 1,500 To record cost of sales. 7 days later Cash 2,880 Accounts Receivable—Credit Card Cos .......... 2,880 To record cash receipts. Quick Study 9-2 (15 minutes) 1. Oct. 31 Allowance for Doubtful Accounts ....................... 1,000 Accounts Receivable—C. Schaub ................ 1,000 To write off account. 2. Dec. 9 Accounts Receivable—C. Schaub * ..................... 200 Allowance for Doubtful Accounts ................. 200 To reinstate a written off account. *If there is a strong belief that the remaining $800 will be paid soon, then the full $1,000 balance can be reinstated. 9 Cash ..................................................................... 200 Accounts Receivable—C. Schaub ................ 200 To record payment on a receivable. 9-2
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Chapter 09 - Accounting for Receivables Quick Study 9-3 (15 minutes) 1. Dec. 31 Bad Debts Expense .......................................... 835 Allowance for Doubtful Accounts ............. 835 To record estimate of uncollectibles [($89,000 x 1.5%) - $500 credit]. 2. ($89,000 x 1.5%) + $200 debit = $1,535 Quick Study 9-4 (15 minutes) Dec. 31 Bad Debts Expense .......................................... 2,700 Allowance for Doubtful Accounts ............. 2,700 To record estimate of uncollectibles ($270,000 x 1%). Quick Study 9-5 (15 minutes) 1. Maturity date is October 31 , which is computed as follows: Days in August ............................................................... 31 Minus the date of the note ............................................. 2 Days remaining in August ............................................. 29 Add days in September .................................................. 30 Add days in October to equal 90 days (October 31 ) .... 31 Period of the note in days .............................................. 90 2. Aug. 2 Notes Receivable—T. Menke ........................... 5,500 Accounts Receivable—T. Menke ..................... 5,500 To record receipt of note on account. Quick Study 9-6 (10 minutes) Oct. 31 Cash .................................................................. 5,665 Notes Receivable—T. Menke ..................... 5,500 Interest Revenue ......................................... 165 To record cash received on note plus interest ($5,500 x 12% x 90/360). 9-3
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Chapter 09 - Accounting for Receivables Quick Study 9-7 (15 minutes) Dec. 31 Interest Receivable ........................................... 40 Interest Revenue ............................................... 40 To record the year-end adjustment for interest earned ($8,000 x 6% x 30/360). Maturity date Jan. 15 Cash .................................................................. 8,060 Interest Receivable ..................................... 40 Interest Revenue ......................................... 20 Notes Receivable ........................................ 8,000 To record cash received on note plus interest. Quick Study 9-8 (10 minutes) May 1 Cash .................................................................. 970 Factoring Fee Expense* ................................... 30 Accounts Receivable ................................. 1,000 To record sale of receivable. *($1,000 x 0.03) Quick Study 9-9 (10 minutes) May 1 Bad Debts Expense ............................................. 1,000 Accounts Receivable—P. Carroll .................. 1,000 To write off an account. Quick Study 9-10 (10 minutes) May 30 Accounts Receivable—P. Carroll ........................ 1,000 Bad Debts Expense ....................................... 1,000 To reinstate an account previously written off. May 30 Cash ..................................................................... 1,000 Accounts Receivable— P. Carroll ................. 1,000 To record cash received on account. 9-4
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Chapter 09 - Accounting for Receivables Quick Study 9-11 (10 minutes) Accounts receivable turnover = = 5.3 times Interpretation : An accounts receivable turnover of 5.3 implies that the company’s average accounts receivable balance is converted into cash 5.3 times per year. The 5.3 turnover is 29% lower than the average turnover of 7.5 for its competitors. The company needs to identify the cause of this poor performance and rectify the situation to at least compete at the average level.
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