PB8-4 Accounting for Accounts and Notes Receivable Transactions [LO 8-2, LO 8-3]
ID: 2518691 • Letter: P
Question
PB8-4 Accounting for Accounts and Notes Receivable Transactions [LO 8-2, LO 8-3]
Elite Events Corporation has provided event planning services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter.
a.
During January, the company provided services for $400,000 on credit.
b.
On January 31, the company estimated bad debts using 1 percent of credit sales.
c.
On February 4, the company collected $350,000 of accounts receivable.
d.
On February 15, the company wrote off a $4,000 account receivable.
e.
During February, the company provided services for $350,000 on credit.
f.
On February 28, the company estimated bad debts using 1 percent of credit sales.
g.
On March 1, the company loaned $10,000 to an employee who signed a 6% note, due in 9 months.
h.
On March 15, the company collected $4,000 on the account written off one month earlier.
i.
On March 31, the company accrued interest earned on the note.
j.
On March 31, the company adjusted for uncollectible accounts, based on the following aging analysis. Allowance for Doubtful Accounts has an unadjusted credit balance of $10,000.
Number of Days Unpaid
Customer
Total
0-30
31-60
61-90
Over 90
Aerosmith
$
2,200
$
1,100
$
1,100
Biggie Small
2,200
$
1,100
$
1,100
Others (not shown to save space)
103,000
40,000
43,000
10,000
10,000
ZZ Top
8,000
8,000
Total Accounts Receivable
$
115,400
$
49,100
$
44,100
$
11,100
$
11,100
Estimated uncollectible (%)
4%
10%
20%
30%
1.
For items (a)–(j), analyze the amount and direction (+ or ?) of effects on specific financial statement accounts and the overall accounting equation. (Enter any decreases to account balances with a minus sign.)
2.
Prepare the journal entries for items (a)–(j). (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
3.
Show how Accounts Receivable, Notes Receivable, and their related accounts would be reported in the current assets section of a classified balance sheet.
4.
Sales Revenue and Service Revenue are two income statement accounts that related to Accounts Receivable. Name two other accounts related to Accounts Receivable and Notes Receivable that would be reported on the income statement and indicate whether each would appear before, or after, Income from Operations.
Elite Events Corporation has provided event planning services for several years. The company uses the percentage of credit sales method to estimate bad debts for internal monthly reporting purposes. At the end of each quarter, the company adjusts its records using the aging of accounts receivable method. The company entered into the following partial list of transactions during the first quarter.
Explanation / Answer
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Shareholder Equity Event Account Asset= Liabilities+ Equity Retained Earning Net Income a. Accounts Receivable 400000 400000 b. Allowance for Doubtful Account 4000 -4000 c. Accounts Receivable -350000 Cash 350000 d. Accounts Receivable -4000 Allowance for Doubtful Account -4000 e. Accounts Receivable 350000 350000 f. Allowance for Doubtful Account 3500 -3500 g. Note Receivable 10000 Cash -10000 h. Allowance for Doubtful Account 4000 Accounts Receivable 4000 Accounts Receivable -4000 Cash 4000 i. Accrued Interest 50 50 j. Allowance for Doubtful Account 1924 -1924 Allowance for Doubtful Account_working 49100*4% 1964 44100*10% 4410 11100*20% 2220 11100*30% 3330 Total 11924 Less: Balance 10000 To be Provided 1924 2. Journal Entries Event Account Debit Credit a. Accounts Receivable 400000 Sales Revenue 400000 b. Bad Debt Expense 4000 Allowance for Doubtful Account 4000 c. Cash 350000 Accounts Receivable 350000 d. Allowance for Doubtful Account 4000 Accounts Receivable 4000 e. Accounts Receivable 350000 Sales Revenue 350000 f. Bad Debt Expense 3500 Allowance for Doubtful Account 3500 g. Note Receivable 10000 Cash 10000 h. Allowance for Doubtful Account 4000 Accounts Receivable 4000 Accounts Receivable 4000 Cash 4000 i. Accrued Interrst 50 Interest Revenue 50 j. Bad Debt Expense 1924 Allowance for Doubtful Account 1924 3. Balance Sheet Reporting Current Assets: Accounts Receivable 115400 Less:Allowance for doubtful account -10000 Accounts Receivable (Net of allowance) 105400 Note Receivable 10000 Interest Receivable 50 4. Income Statement Reporting i. Interest Revenue-Below income from operations ii. Bad Debt Expense-Above income from operationsRelated Questions
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