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Principles of Accounting, Volume 1: Financial Accounting

Problem Set B

Principles of Accounting, Volume 1: Financial AccountingProblem Set B

Problem Set B

PB 1.

LO 9.1Prepare journal entries for the following transactions from Lumber Wholesale.

PB 2.

LO 9.1Prepare journal entries for the following transactions of Maritime Memories.

PB 3.

LO 9.1Prepare journal entries for the following transactions from School Mart.

PB 4.

LO 9.2Bristax Corporation recorded $1,385,660 in credit sales for the year, and $732,410 in accounts receivable. The uncollectible percentage is 3.1% for the income statement method and 4.5% for the balance sheet method.

  1. Record the year-end adjusting entry for 2018 bad debt using the income statement method.
  2. Record the year-end adjusting entry for 2018 bad debt using the balance sheet method.
  3. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $20,550; record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.
  4. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $17,430; record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.
PB 5.

LO 9.2The following accounts receivable information pertains to Select Distributors.

  1. Determine the estimated uncollectible bad debt for Select Distributors in 2018 using the balance sheet aging of receivables method.
  2. Record the year-end 2018 adjusting journal entry for bad debt.
  3. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $233,180; record the year-end entry for bad debt, taking this into consideration.
  4. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $199,440; record the year-end entry for bad debt, taking this into consideration.
  5. On March 21, 2019, Select Distributors identifies Aida Norman’s account as uncollectible in the amount of $10,890. Record the entry for identification.
PB 6.

LO 9.2Ink Records recorded $2,333,898 in credit sales for the year and $1,466,990 in accounts receivable. The uncollectible percentage is 3% for the income statement method and 5% for the balance sheet method.

  1. Record the year-end adjusting entry for 2018 bad debt using the income statement method.
  2. Record the year-end adjusting entry for 2018 bad debt using the balance sheet method.
  3. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $20,254; record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.
PB 7.

LO 9.3Review the select information for Liquor Plaza and Beer Buddies (industry competitors) and complete the following.

  1. Compute the accounts receivable turnover ratios for each company for 2018 and 2019.
  2. Compute the number of day’s sales in receivables ratios for each company for 2018 and 2019.
  3. Determine which company is the better investment and why. Round answers to two decimal places.
PB 8.

LO 9.3The following select financial statement information from Vortex Computing.

Compute the accounts receivable turnover ratios and the number of days’ sales in receivables ratios for 2018 and 2019 (round answers to two decimal places). What do the outcomes tell a potential investor about Vortex Computing if industry average for accounts receivable turnover ratio is 4 times and days’ sales in receivables ratio is 85 days?

PB 9.

LO 9.4Elegant Linens uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019.

To manage earnings more favorably, Elegant Linens considers changing the past-due categories as follows.

  1. Complete each table by filling in the blanks.
  2. Determine the difference between total uncollectible.
  3. Complete the following 2019 comparative income statements for 2019, showing net income changes as a result of the changes to the balance sheet aging method categories.
  4. Describe the categories change effect on net income and accounts receivable.
PB 10.

LO 9.4Goods for Less uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019.

To manage earnings more favorably, Goods for Less considers changing the past-due categories as follows.

  1. Complete each table by filling in the blanks.
  2. Determine the difference between totals uncollectible.
  3. Describe the categories change effect on net income and accounts receivable.
PB 11.

LO 9.6Record journal entries for the following transactions of Noreen Turbines.

PB 12.

LO 9.6Record journal entries for the following transactions of Mesa Construction.

PB 13.

LO 9.6Record journal entries for the following transactions of Graphics & Signs.

PB 14.

LO 9.6Record journal entries for the following transactions of Trout Masters.

PB 15.

LO 9.7Shimmer Products is considering which bad debt estimation method works best for its company. It is deciding between the income statement method, balance sheet method of receivables, and balance sheet aging of receivables method. If it uses the income statement method, bad debt would be estimated at 5.6% of credit sales. If it were to use the balance sheet method, it would estimate bad debt at 13.7% percent of accounts receivable. If it were to use the balance sheet aging of receivables method, it would split its receivables into three categories: 0–30 days past due at 5%, 31–90 days past due at 21%, and over 90 days past due at 30%. There is currently a zero balance, transferred from the prior year’s Allowance for Doubtful Accounts. The following information is available from the year-end income statement and balance sheet.

There is also additional information regarding the distribution of accounts receivable by age.

Prepare the year-end adjusting entry for bad debt, using

  1. Income statement method
  2. Balance sheet method of receivables
  3. Balance sheet aging of receivables method
  4. Which method should the company choose, and why?
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