(Learning Objectives 1, 4, 5, 6: Apply GAAP for revenue, receivables,collections, and uncollectibles using the percent-of-sales method; account for notesreceivable) Hopewell Shipping Corporation is an overnight shipper. Since it sells on credit, thecompany cannot expect to collect 100% of its accounts receivable. At October 31, 2018, and2019, respectively, Hopewell reported the following on its balance sheet (in millions of dollars):October 31,2019 2018Accounts receivable.................................................. $4,200 $4,000Less: Allowance for uncollectible accounts...............Accounts receivable, net........................................... $4,030 $3,840(170) (160)During the year ended October 31, 2019, Hopewell earned service revenue and collected cashfrom customers. Assume uncollectible-account expense for the year was 5% of service revenueon account and Hopewell wrote off uncollectible receivables and made other adjustments as necessary (see below). At year-end, Hopewell ended with the foregoing October 31, 2019, balances.Requirements1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts,and insert the October 31, 2018, balances as given.2. Journalize the following transactions of Hopewell for the year ended October 31, 2019(explanations are not required):a. Service revenue was $32,500 million, of which 8% is cash and the remainder is onaccount.b. Collections from customers on account were $28,123 million. No sales discountswere taken.c. Uncollectible-account expense was 5% of service revenue on account.d. Write-offs of uncollectible accounts receivable were $1,485 million.e. On October 1, Hopewell received a 2-month, 9%, $135 million note receivable from alarge corporate customer in exchange for the customer’s past due account; Hopewellmade the proper year-end adjusting entry for the interest on this note.f. Hopewell’s October 31, 2019, year-end bank statement reported $43 million ofnon-sufficient funds (NSF) checks from customers.3. Post your entries to the Accounts Receivable and Allowance for Uncollectible AccountsT-accounts.4. Compute the ending balances for Accounts Receivable and Allowance for UncollectibleAccounts and compare your balances to the actual October 31, 2019, amounts. Theyshould be the same. How much does Hopewell expect to collect from its customers afterOctober 31, 2019?5. Show the net effect of these transactions on Hopewell’s net income for the year endedOctober 31, 2019.
(Learning Objectives 1, 4, 5, 6: Apply GAAP for revenue, receivables,
collections, and uncollectibles using the percent-of-sales method; account for notes
receivable) Hopewell Shipping Corporation is an overnight shipper. Since it sells on credit, the
company cannot expect to collect 100% of its
2019, respectively, Hopewell reported the following on its
October 31,
2019 2018
Accounts receivable.................................................. $4,200 $4,000
Less: Allowance for uncollectible accounts...............
Accounts receivable, net........................................... $4,030 $3,840
(170) (160)
During the year ended October 31, 2019, Hopewell earned service revenue and collected cash
from customers. Assume uncollectible-account expense for the year was 5% of service revenue
on account and Hopewell wrote off uncollectible receivables and made other adjustments as necessary (see below). At year-end, Hopewell ended with the foregoing October 31, 2019, balances.
Requirements
1. Prepare T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts,
and insert the October 31, 2018, balances as given.
2. Journalize the following transactions of Hopewell for the year ended October 31, 2019
(explanations are not required):
a. Service revenue was $32,500 million, of which 8% is cash and the remainder is on
account.
b. Collections from customers on account were $28,123 million. No sales discounts
were taken.
c. Uncollectible-account expense was 5% of service revenue on account.
d. Write-offs of uncollectible accounts receivable were $1,485 million.
e. On October 1, Hopewell received a 2-month, 9%, $135 million note receivable from a
large corporate customer in exchange for the customer’s past due account; Hopewell
made the proper year-end
f. Hopewell’s October 31, 2019, year-end bank statement reported $43 million of
non-sufficient funds (NSF) checks from customers.
3.
T-accounts.
4. Compute the ending balances for Accounts Receivable and Allowance for Uncollectible
Accounts and compare your balances to the actual October 31, 2019, amounts. They
should be the same. How much does Hopewell expect to collect from its customers after
October 31, 2019?
5. Show the net effect of these transactions on Hopewell’s net income for the year ended
October 31, 2019.
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