Financial Accounting, 8th Edition
8th Edition
ISBN: 9780078025556
Author: Robert Libby, Patricia Libby, Daniel Short
Publisher: McGraw-Hill Education
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Chapter 6, Problem 3AP
Determining
LO6-2 Briggs & Stratton Engines Inc. uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/45. The balance of each account receivable is aged on the basis of four time periods as follows: (1) not yet due, (2) up to 6 months past due, (3) 6 to 12 months past due, and (4) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 1 percent, (b) 5 percent, (c) 20 percent, and (d) 50 percent, respectively.
At December 31, 2014 (end of the current accounting year), the
| Date | Explanation | Debit | Credit | Balance |
| R. Devens—Account Receivable | ||||
| 3/13/2014 | Sale | 19,000 | 19,000 | |
| 5/12/2014 | Collection | 10,000 | 9,000 | |
| 9/30/2014 | Collection | 7,000 | 2,000 | |
| C. Howard—Account Receivable | ||||
| 11/01/2013 | Sale | 31,000 | 31,000 | |
| 06/01/2014 | Collection | 20,000 | 11,000 | |
| 12/01/2014 | Collection | 5,000 | 6,000 | |
| D. McClain—Account Receivable | ||||
| 10/31/2014 | Sale | 12,000 | 12,000 | |
| 12/10/2014 | Collection | 8,000 | 4,000 | |
| T. Skibinski—Account Receivable | ||||
| 05/02/2014 | Sale | 15,000 | 15,000 | |
| 06/01/2014 | Sale | 10,000 | 25,000 | |
| 06/15/2014 | Collection | 15,000 | 10,000 | |
| 07/15/2014 | Collection | 10,000 | 0 | |
| 10/01/2014 | Sale | 26,000 | 26,000 | |
| 11/15/2014 | Collection | 16,000 | 10,000 | |
| 12/15/2014 | Sale | 4,500 | 14,500 | |
| H. Wu—Account Receivable | ||||
| 12/30/2014 | Sale | 13,000 | 13,000 | |
Required:
- 1. Compute the total accounts receivable in each age category.
- 2. Compute the estimated uncollectible amount for each age category and in total.
- 3. Give the
adjusting entry for bad debt expense at December 31, 2014. - 4. Show how the amounts related to accounts receivable should be presented on the 2014 income statement and
balance sheet .
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Chapter 6 Solutions
Financial Accounting, 8th Edition
Ch. 6 - Prob. 1QCh. 6 - What is gross profit or gross margin on sales? In...Ch. 6 - What is a credit card discount? How does it affect...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Differentiate accounts receivable from notes...Ch. 6 - Which basic accounting principle is the allowance...Ch. 6 - Using the allowance method, is bad debt expense...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - Prob. 12QCh. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Briefly explain how the total amount of cash...Ch. 6 - Prob. 16QCh. 6 - Sales discounts with terms 2/10, n/30 mean: a. 10...Ch. 6 - Gross sales total 300,000, one-half of which were...Ch. 6 - A company has been successful in reducing the...Ch. 6 - When a company using the allowance method writes...Ch. 6 - You have determined that Company X estimates bad...Ch. 6 - Prob. 6MCQCh. 6 - Which of the following is not a step toward...Ch. 6 - When using the allowance method, as bad debt...Ch. 6 - Which of the following best describes the proper...Ch. 6 - Prob. 10MCQCh. 6 - Prob. 1MECh. 6 - Prob. 2MECh. 6 - Prob. 3MECh. 6 - Recording Bad Debts Prepare journal entries for...Ch. 6 - Prob. 5MECh. 6 - Determining the Effects of Credit Policy Changes...Ch. 6 - Prob. 7MECh. 6 - Prob. 8MECh. 6 - Prob. 1ECh. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Prob. 3ECh. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Prob. 5ECh. 6 - Prob. 6ECh. 6 - Prob. 7ECh. 6 - Prob. 8ECh. 6 - Prob. 9ECh. 6 - Prob. 10ECh. 6 - Prob. 11ECh. 6 - Prob. 12ECh. 6 - Prob. 13ECh. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Prob. 16ECh. 6 - Prob. 17ECh. 6 - Prob. 18ECh. 6 - Prob. 19ECh. 6 - Prob. 20ECh. 6 - Interpreting tho Effects of Salos Declines and...Ch. 6 - Prob. 22ECh. 6 - Prob. 23ECh. 6 - Prob. 24ECh. 6 - Prob. 1PCh. 6 - Prob. 2PCh. 6 - Recording Bad Debts and Interpreting Disclosure of...Ch. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 1APCh. 6 - Prob. 2APCh. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 4APCh. 6 - Prob. 5APCh. 6 - Prob. 1CPCh. 6 - Prob. 2CPCh. 6 - Prob. 3CPCh. 6 - Prob. 4CPCh. 6 - Prob. 5CPCh. 6 - Prob. 6CPCh. 6 - Prob. 1CC
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