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EA11. 9.4 Mirror Mart uses the balance sheet aging method to account for uncollectible debt on
receivables. The following is the past-due category information for outstanding receivable debt for 2019.
To manage earnings more efficiently, Mirror Mart decided to change past-due categories as follows.
Complete the following.
A. Complete each table by filling in the blanks.
B. Determine the difference between total uncollectible.
C. Explain how the new total uncollectible amount affects net income and accounts receivable.
EA12. 9.4 Aerospace Electronics reports $567,000 in credit sales for 2018 and $632,500 in 2019. They have a
$499,000 accounts receivable balance at the end of 2018, and $600,000 at the end of 2019. Aerospace uses the
income statement method to record bad debt estimation at 5% during 2018. To manage earnings more
favorably, Aerospace changes bad debt estimation to the balance sheet method at 7% during 2019.
A. Determine the bad debt estimation for 2018.
B. Determine the bad debt estimation for 2019.
C. Describe a benefit to Aerospace Electronics in 2019 as a result of its earnings management.
EA13. 9.4 Dortmund Stockyard reports $896,000 in credit sales for 2018 and $802,670 in 2019. It has a
$675,000 accounts receivable balance at the end of 2018, and $682,000 at the end of 2019. Dortmund uses the
balance sheet method to record bad debt estimation at 8% during 2018. To manage earnings more favorably,
Dortmund changes bad debt estimation to the income statement method at 6% during 2019.
A. Determine the bad debt estimation for 2018.
B. Determine the bad debt estimation for 2019.
C. Describe a benefit to Dortmund Stockyard in 2019 as a result of its earnings management.
EA14. 9.6 Arvan Patel is a customer of Bank’s Hardware Store. For Mr. Patel’s latest purchase on January 1,
2018, Bank’s Hardware issues a note with a principal amount of $480,000, 13% annual interest rate, and a
24-month maturity date on December 31, 2019. Record the journal entries for Bank’s Hardware Store for the
following transactions.
A. Note issuance
B. Subsequent interest entry on December 31, 2018
C. Honored note entry at maturity on December 31, 2019.
626 Chapter 9 Accounting for Receivables
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EA15. 9.6 Resin Milling issued a $390,500 note on January 1, 2018 to a customer in exchange for
merchandise. The merchandise had a cost to Resin Milling of $170,000. The terms of the note are 24-month
maturity date on December 31, 2019 at a 5% annual interest rate. The customer does not pay on its account
and dishonors the note. Record the journal entries for Resin Milling for the following transactions.
A. Initial sale on January 1, 2018
B. Dishonored note entry on January 1, 2020, assuming interest has not been recognized before note
maturity
EA16. 9.6 Mystic Magic issued a $120,250 note on January 1, 2018 to a customer, Amy Arnold, in exchange
for merchandise. Terms of the note are 9-month maturity date on October 1, 2018 at a 9.6% annual interest
rate. Amy Arnold does not pay on her account and dishonors the note. On November 10, 2018, Mystic Magic
decides to sell the dishonored note to a collection agency for 25% of its value. Record the journal entries for
Mystic Magic for the following transactions.
A. Initial sale on January 1, 2018
B. Dishonored note entry on October 1, 2018
C. Receivable sale on November 10, 2018
B Exercise Set B
EB1. 9.1 Prepare journal entries for the following transactions from Movie Mart.
Sept. 10 Customer Ellie Monk purchased $43,820 worth of merchandise from Movie Mart, costing Movie
Mart $28,745. Terms of the sale are 3/10, n/60, invoice dated September 10.
Sept. 22 Ellie Monk pays in full with cash for her purchase on September 22.
EB2. 9.1 Prepare journal entries for the following transactions from Angled Pictures.
June 21 Customer LeShaun Rogers purchased 167 picture frames at a sales price of $28 per frame with
her American credit card. The cost to Angled Pictures for the sale is $19 per frame. American
credit card charges Angled Pictures a fee of 3% of the sale.
June 30 American remits payment to Angled Pictures, less any fees.
EB3. 9.1 Consider the following transaction: On February 15, Darling Dolls sells 110 dolls with a sales price
of $15 per doll to Rosemary Cummings The cost to Darling Dolls is $5 per doll. Prepare a journal entry under
each of the following conditions. Assume Gentry charges a 3.5% fee for each sales transaction using its card.
A. Payment is made using a credit, in-house account.
B. Payment is made using a Gentry credit card.
Chapter 9 Accounting for Receivables 627
EB4. 9.2 Laminate Express extended credit to customer Amal Sunderland in the amount of $244,650 for his
January 4 purchase of flooring. Terms of the sale are 2/30, n/120. The cost of the purchase to Laminate Express
is $88,440. On April 5, Laminate Express determined that Amal Sunderland’s account was uncollectible and
wrote off the debt. On June 22, Amal Sunderland unexpectedly paid 30% of the total amount due in cash on his
account. Record each Laminate Express transaction with Amal Sunderland. In order to demonstrate the write-
off and then subsequent collection of an account receivable, assume in this example that Laminate Express
rarely extends credit directly, so this transaction is permitted to use the direct write-off method. Remember,
though, that in most cases the direct write-off method is not allowed.
EB5. 9.2 Olena Mirrors records bad debt using the allowance, income statement method. They recorded
$343,160 in accounts receivable for the year and $577,930 in credit sales. The uncollectible percentage is 4.4%.
On May 10, Olena Mirrors identifies one uncollectible account from Elsa Sweeney in the amount of $2,870. On
August 12, Elsa Sweeney unexpectedly pays $1,441 toward her account. Record journal entries for the
following.
A. Year-end adjusting entry for 2017 bad debt
B. May 10, 2018 identification entry
C. Entry for payment on August 12, 2018
EB6. 9.2 Olena Mirrors records bad debt using the allowance, balance sheet method. They recorded
$343,160 in accounts receivable for the year and $577,930 in credit sales. The uncollectible percentage is 4.4%.
On June 11, Olena Mirrors identifies one uncollectible account from Nadia White in the amount of $4,265. On
September 14, Nadia Chernoff unexpectedly pays $1,732 toward her account. Record journal entries for the
following.
A. Year-end adjusting entry for 2017 bad debt
B. June 11, 2018 identification entry
C. Entry for payment on September 14, 2018
EB7. 9.2 The following accounts receivable information pertains to Envelope Experts.
Determine the estimated uncollectible bad debt from Envelope Experts using the balance sheet aging of
receivables method, and record the year-end adjusting journal entry for bad debt.
EB8. 9.3 Using the following select financial statement information from Mover Supply Depot, compute the
accounts receivable turnover ratios for 2018 and 2019 (round answers to two decimal places). What do the
outcomes tell a potential investor about Mover Supply Depot if the industry average is 4 times?
628 Chapter 9 Accounting for Receivables
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
EB9. 9.3 Using the following select financial statement information from Mover Supply Depot, compute the
number of days’ sales in receivables ratios for 2018 and 2019 (round answers to two decimal places). What do
the outcomes tell a potential investor about Mover Supply Depot if the competition collects in approximately
65 days?
EB10. 9.3 Starlight Enterprises has net credit sales for 2019 in the amount of $2,600,325, beginning
accounts receivable balance of $844,260, and an ending accounts receivable balance of $604,930. Compute the
accounts receivable turnover ratio and the number of days’ sales in receivables ratio for 2019 (round answers
to two decimal places). What do the outcomes tella potential investor about Starlight Enterprises if the
industry average is 1.5 times and the number of days’ sales ratio is 175 days?
EB11. 9.4 Outpost Designs uses the balance sheet aging method to account for uncollectible debt on
receivables. The following is the past-due category information for outstanding receivable debt for 2019.
To manage earnings more favorably, Outpost Designs decided to change past-due categories as follows.
Complete the following.
A. Complete each table by filling in the blanks.
B. Determine the difference between total uncollectible.
C. Explain how the new total uncollectible amount affects net income and accounts receivable.
EB12. 9.4 Clovis Enterprises reports $845,500 in credit sales for 2018 and $933,000 in 2019. It has a $758,000
accounts receivable balance at the end of 2018 and $841,000 at the end of 2019. Clovis uses the income
statement method to record bad debt estimation at 4% during 2018. To manage earnings more favorably,
Clovis changes bad debt estimation to the balance sheet method at 5% during 2019.
A. Determine the bad debt estimation for 2018.
B. Determine the bad debt estimation for 2019.
C. Describe a benefit to Clovis Enterprises in 2019 as a result of its earnings management.
Chapter 9 Accounting for Receivables 629
EB13. 9.4 Fortune Accounting reports $1,455,000 in credit sales for 2018 and $1,678,430 in 2019. It has an
$825,000 accounts receivable balance at the end of 2018 and $756,000 at the end of 2019. Fortune uses the
balance sheet method to record bad debt estimation at 7.5% during 2018. To manage earnings more
favorably, Fortune changes bad debt estimation to the income statement method at 5.5% during 2019.
A. Determine the bad debt estimation for 2018.
B. Determine the bad debt estimation for 2019.
C. Describe a benefit to Fortune in 2019 as a result of its earnings management.
EB14. 9.6 Anderson Air is a customer of Handler Cleaning Operations. For Anderson Air’s latest purchase
on January 1, 2018, Handler Cleaning Operations issues a note with a principal amount of $1,255,000, 6%
annual interest rate, and a 24-month maturity date on December 31, 2019. Record the journal entries for
Handler Cleaning Operations for the following transactions.
A. Entry for note issuance
B. Subsequent interest entry on December 31, 2018
C. Honored note entry at maturity on December 31, 2019
EB15. 9.6 Rain T-Shirts issued a $440,600 note on January 1, 2018 to a customer, Larry Potts, in exchange for
merchandise. The merchandise had a cost to Rain T-Shirts of $220,300. The terms of the note are 24-month
maturity date on December 31, 2019 at a 4.5% annual interest rate. Larry Potts does not pay on his account
and dishonors the note. Record journal entries for Rain T-Shirts for the following transactions.
A. Initial sale on January 1, 2018
B. Dishonored note entry on January 1, 2020, assuming interest has not been recognized before note
maturity
EB16. 9.6 Element Surfboards issued a $210,800 note on January 1, 2018 to a customer, Leona Marland, in
exchange for merchandise. Terms of the note are 9-month maturity date on October 1, 2018 at a 10.2% annual
interest rate. Leona Marland does not pay on her account and dishonors the note. On December 2, 2018,
Element Surfboards decides to sell the dishonored note to a collection agency for 30% of its value. Record the
journal entries for Element Surfboards for the following transactions.
A. Initial sale on January 1, 2018
B. Dishonored note entry on October 1, 2018
C. Receivable sale on December 2, 2018
630 Chapter 9 Accounting for Receivables
This OpenStax book is available for free at http://cnx.org/content/col25448/1.4
	Chapter 9. Accounting for Receivables
	Exercise Set B