ACC 01 Week 11 – Chapter 9 — P9-3, P9-4, P9-5

problem_9-3s13 problem_9-4s13 problem_9-5s13

Problem

9-3

On December 31, 2008, Hill Company’s records show the following results for
the year:

Cash sales
Credit sales

In addition, its unadjusted trial balance includes the following items:

Accounts receivable
Allowance for doubtful accounts

Required

 Prepare the adjusting entry for Hill Co. to recognize bad debts under
each of the following independent assumptions:
a. Bad debts are estimated to be of credit sales.
b. Bad debts are estimated to be of total sales.
c. An aging analysis suggests of accounts receivable at year-end

are uncollectible.

Show how Accounts Receivable and the Allowance for Doubtful Accounts
appear on the December 31, 2008, balance sheet given the facts in part (1a).

Show how Accounts Receivable and the Allowance for Doubtful Accounts
appear on the December 31, 2008, balance sheet given the facts in part (1c).

Check Bad debts expense: (1b)
(1c)

debit
credit

4.00%
2.10%

831,000$

99,750$
98,495$

2,300,000$

1,225

1

2

3

2,450,000

12.00%

Problem

PROBLEM 9-4

Diamond Company has credit sales of $2.0 million dollars. On December 31, 2008,
the company’s Allowance for Doubtful Accounts has an unadjusted debit balance
of . Newcomer prepares a schedule of its December 31, 2008, accounts
receivable by age. On the basis of past experience, it also estimates the percent
of receivables in each age category that will become uncollectible. This information
is summarized here:

Not due yet
1 to 30 days past due
31 to 60 days past due
61 to 90 days past due
Over 90 days past due

Required

1.  Estimate the amount needed in the Allowance for Doubtful Accounts at
December 31, 2008, using the aging of accounts receivable method.

2.  Prepare the journal entry to record bad debts expense at December 31, 2008.

Check dr. Bad Debt Expense 6,175$

7.50%
2.50%
1.25%

2,100$

82.50%
30.00%

14,000
7,000
4,000

Expected Percent
Uncollectible

2,000

Age of Accounts
Receivable

December 31, 2008
Accounts Receivable

28,000$

• Problem

PROBLEM 9-5

The following selected transactions are from VP Company:

Dec Accepted a , 90-day, note dated this day granting Aaron
Burr a time extension on his account receivable.
Made an adjusting entry to record the accrued interest on the Burr note.

Jan Accepted a , 90-day, note dated this day granting George
Clinton a time extension on his past-due account receivable.

Feb Received payment of principal plus interest from Burr for the note of
December 1.

Apr Clinton dishonored his note when presented for payment.
Jun Accepted a , 60-day, note dated this day in granting

Elbridge Gerry a time extension on his past due account.
Aug Gerry refuses to pay the note that was due Aug 9. Prepare the journal entry

to charge the dishonored note plus accrued interest to Gerry’s account
receivable.

Sep Received payment from Gerry for the maturity value of his dishonored note
plus interest for the 50 days past the maturity of the note

Nov Accepted a , 120-day, note dated this day from Daniel
Tompkins granting a time extension on his account.

Dec Wrote off the Clinton account against Allowance for Doubtful Accounts.
Dec Made an adjusting entry to record accrued interest on the Tompkins note.

Required

1. Prepare journal entries to record these transactions and events.

Check Feb 29, Cr. Interest Revenue
Aug 14, Cr. Interest Revenue

6.00%

200$
320$

6.00%

22,000$ 5.00%

32,000$ 6.00%

9.00%

3

1

201 0

201 1

20,000$

36,000$

1

16

29

16

31
31

11

28

14

10

• Problem