SI – Acct 284Chapter 8 - October 26, 20091. What is the difference between an account receivable and a note receivable?2. Since companies typically do not know a receivable will be uncollectible until much later, we must estimate our bad debt expense to record it within the period the sale was made. What accounting principle are we following?3. What effect does recognizing (when we estimate) bad debt have on the balance sheet and incomestatement?4. What effect does “writing off” our bad debt have on the balance sheet and income statement when it is finally determined as uncollectible?5. Percentage of Credit Sales (allowance method).Company ABC estimates bad debt expense of 2% of credit sales. Credit sales for the period were $120,000. a. What amount of bad debt expense should be recorded for the period?b. What is the appropriate journal entry to recognize bad debt expense?c. Company ABC determines $1,000 of their A/R is uncollectible. What is the appropriate journal entry to “write off” this uncollectible A/R?d. What is the balance in the Allowance for Doubtful Accounts after part (b) & (c) is completed, assuming no beginning balance in the allowance?6. Aging of Accounts Receivables (allowance method)Company XYZ has the following information regarding their A/R.Age of A/R Amount of A/R Estimated % Bad Debt0-30 Days $500,000 2%30-60 Days $250,000 5%60-90 Days $100,000 8%>90 Days $60,000 12%a. How much should be in the allowance for doubtful accounts?b. Assume the beginning balance in the allowance is $15,000 (normal credit). What is the appropriate journal entry to recognize bad debt for this period?c. Company XYZ determines $5,000 of uncollectible A/R. What is the appropriate journal entry to“write off” this A/R?7. Company Y lent $300,000 for 4% annual interest on July 1,2008. The interest will be collected with the repayment of the loan on July 1, 2009. a. On December 31, 2008, how much interest has Company Y earned? What is the appropriate journal entry?b. On July 1, 2009, how much cash will Company Y collect? What will the journal entry
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