Accounts Receivable (AR) – Lecture Problems Pg 1 Accounts Receivable (AR) Lecture Problems Example #1 (module 1) On July 3, XYZ Company sold $10,000 worth of merchandise to ABC Company on account. Credit terms were 2/10, n/30. ABC Company returned $2,000 worth of goods on July 5; paid one-half of its remaining bill on July 11, and paid the other one-half of its remaining bill on July 29. REQUIRED: Prepare all necessary journal entries recorded by XYZ Company for the above transactions. Example #2 (module 4) The following transactions relate to Betty DeRose, Inc.: January 4, 2004: Made a credit sale to M.T. Glass, a customer, in the amount of $2,500 and a credit sale to Sandy Beach, a customer, in the amount of $4,000. March 19, 2004: Sandy Beach paid the $4,000 owed from the January 4 sale. September 27, 2004: After a concerted effort to collect, the $2,500 account receivable from M.T. Glass was written off as uncollectible. December 31, 2004: Based on past experience, Betty DeRose estimates that 1% of the years credit sales of $246,000 will be uncollectible. March 8, 2005: M.T. Glass paid the $2,500 account receivable written off above. REQUIRED: (1) Prepare the journal entries for the above five transactions. (2) Indicate the effect of each transaction on: a. Net income (income statement). b. Net realizable value (balance sheet). c. Cash flows (statement of cash flows).Accounts Receivable (AR) – Lecture Problems Pg 2 Example #3 (module 6) XYZ Company has a $250,000 balance in the accounts receivable account on December 31, 2002. The allowance for doubtful accounts has a $2,100 credit balance at December 31, 2002 before the year-end estimate of bad debt expense. During 2002, XYZ Company reported net credit sales of $800,000. Part A: Assume XYZ Company uses the net credit sales method of estimating bad debt expense, and bad debt expense is estimated to be 2% of net credit sales for the year. 1. Calculate the bad debt expense for 2002. 2. What is the net realizable value of accounts receivable at December 31, 2002? Part B: Assume XYZ Company uses the aging method of estimating bad debt expense. The following aging schedule was prepared at December 31, 2002: Category Amount % estimated to be uncollectible Current $150,000 2% 1 – 30 days past due 60,000 4% 31 – 90 days past due 30,000 9% Over 90 days past due 10,000 20% 1. Calculate the bad debt expense for 2002. 2. What is the net realizable value of accounts receivable at December 31, 2002? 3. Calculate the bad debt expense for 2002 if the allowance for doubtful accounts had a $2,100 debit balance before the adjustment for bad debt expense.Accounts Receivable (AR) – Lecture Problems Pg 3 Example #4 (module 7) Grandma Veazy’s House of Fun has compiled the following information to determine its year-end estimate of bad debt expense: Sales during 1995 (all on credit) …………………………… 500,000 Sales returns & allowances during 1995 …………………... 18,000 Accounts receivable (at December 31, 1995) ……………... 420,000 Allowance for doubtful accounts (at January 1, 1995) …… 18,500 credit balance Accounts written off as uncollectible during 1995 ………... 12,200 Accounts previously written off as uncollectible that were recovered during 1995 ………………...... 7,800 Part A: Assume Grandma Veazy uses the net credit sales method of estimating bad debt expense, and bad debt expense is estimated to be 4% of net credit sales for the year. 1. Calculate the amount of bad debt expense for 1995. 2. Calculate the net realizable value of accounts receivable at December 31, 1995. Part B: Assume Grandma Veazy uses the aging method of estimating bad debt expense, and the following aging schedule was prepared at December 31, 1995: Category Amount % estimated to be uncollectible Current $320,000 6% 1 – 30 days past due 50,000 9% 31 – 90 days past due 30,000 15% Over 90 days past due 20,000 40% 1. Calculate the amount of bad debt expense for