6th Edition

ISBN: 9781265554927

Author: PHILLIPS

Publisher: MCG

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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by t…

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable ari…

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Textbook Question

Chapter 8, Problem 1PB

Recording Accounts Receivable Transactions Using the Allowance Method

Chipman Sofware recently reported the following amounts in its unadjusted trial balance at its year-end:

	Debits	Credits
Accounts Receivable	$3,000
Allowance for Doubtful Accounts		$ 20
Sales (assume all on credit)		44,000

Required:

1. Chipman uses ¼ of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.
2. Assume instead that Chipman uses the aging of accounts receivable method and estimates that $80 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense.
3. Repeat requirement 2, except this time assume Chipman’s year-end unadjusted balance in Allowance for Doubtful Accounts was a debit balance of $20.
4. If one of Chipman’s main customers declared bankruptcy after year-end, what journal entry would be used to write off its $15 balance?

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Chapter 8, Problem 5PA

Chapter 8, Problem 2PB

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Chapter 8 Solutions

FUNDAMENTALS OF FINANCIAL ACCOUNTING LL

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Solution Summary: The author assumes C Software uses percentage of sales method to record the bad debt expense.

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