Need help with these accounting questions on Receivables: 1. Guinevere Company h
ID: 2543839 • Letter: N
Question
Need help with these accounting questions on Receivables:
1.
Guinevere Company has the following data extracted from its Accounts Receivable records at June 30, 2011
- Guinevere's sales terms are 1/15 n/30 and it records sales at the gross amount of the invoice.
- Guinevere's year end is June 30
- The unadjusted balance in the Allowance for Doubtful Accounts at June 30 is $8,000 dr.
- Guinevere makes average sales of $2,000,000 per year and averages write offs of uncollectible balances of $100,000 per year.
- Sales for the year ended June 30, 2010 are $1,400,000 credit sales and $400,000 cash sales
- Guinevere has a very conservative receivables management strategy.
- No adjusting entries have been recorded at June 30
If Guinevere uses the Allowance Method (percentage of sales) to estimate bad debts, the adjusting entry at June 30 to record the provision for uncollectible accounts would involve a credit to the "Allowance for Uncollectible Accounts" of:
$78,000
$90,000
$70,000
Some other amount
$40,000
2.
Chocolate Corner Company had the following transactions during the current year:
Apr. 8. Received a $7,050, 75-day, 8% note from Lance Armstrong in payment of account.
May 24.Wrote off customer Joe Nutella's account against the Allowance for Uncollectible Accounts, $150
June 22. Received payment of Lance Armstrong's note in full.
Sept. 10.Gave a $5,600, 90-day, 9% note to Herbert Anson in payment of account.
Sept.18. Received payment of Joe Nutella's account, written off May 24.
Dec 9. Paid principal and interest due on note to Herbert Anson.
Please Note: a 360-day year is standard for many such interest computations - for this course interest is to the nearest month rather than precisely to the day. Round interest to the nearest dollar (no cents).
If needed record the above transactions in general journal form.
The journal entries on Sep 18th have the following:
Dr. Allowance for Uncollectible Accounts $150
Cr. Allowance for Uncollectible Accounts $150
None of the other alternatives are correct
Cr Cash $150
Dr. Notes Receivables - J. Nut $150
3.
Use the information in the table to answer the question below about Mary's Boutique
If Mary's Boutique uses the direct write off method, what is the balance in Accounts Receivable at the end of 2005?
$127,000
$770,000
$50,000
$2,970,000
$643,000
Customer Balance Current 31 -75 days Over 75 days A $8,000 $5,000 $2,000 $1,000 B $2,000 - $2,000 - C $4,000 $4,000 - - D $9,000 $2,000 $1,000 $6,000 E $3,000 $2,000 - $1,000 F $6,000 $6,000 - - G $7,000 $3,000 $3,000 $1,000 Totals $39,000 $22,000 $8,000 $9,000Explanation / Answer
Solution 1:
Average sales for Guinevere = $2,000,000
Average write off = $100,000
Therefore percentage of sales uncolllectible = $100,000 / $2,000,000 = 5%
Credit sales for june 30 2010 = $1,400,000
Therefore
The adjusting entry at June 30 to record the provision for uncollectible accounts would involve a credit to the "Allowance for Uncollectible Accounts" of = $1,400,000*5% = $70,000
Hence 3rd option is the right choice.
Solution 2:
The journal entry to recover bad debts already written off using allowance of uncollectible accounts will involve
Debiting cash and crediting allowance for uncollectible accounts.
Therefore allowance for uncollectible accounts will be credited by $150. Hence 2nd option is the right choice.
Solution 3:
hence balance of accounts receivables at the end of 2005 = $643,000
Last option is the right choice.
Computation of ending balance of accounts receivables Particulars 2002 2003 2004 2005 Opening balance $0.00 $5,000.00 $430,000.00 $593,000.00 Add: Sales $450,000.00 $900,000.00 $800,000.00 $820,000.00 Less: Cash Collection $410,000.00 $450,000.00 $590,000.00 $750,000.00 Less: Write offs $35,000.00 $25,000.00 $47,000.00 $20,000.00 Ending balance $5,000.00 $430,000.00 $593,000.00 $643,000.00Related Questions
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