HW Problem 72 Gretel Companys accounts receivable has a year

HW Problem 7.2 -Gretel Company\'s accounts receivable has a year-end balance of $915,000 and its allowance for doubtful accounts has a $6,000 credit balance. Gretel ages its accounts receivable and estimates uncollectible accounts as follows. Uncollectible 1.00% 1.80% Balance $550,000 $220,000 $85,000 $48,000 $12.000 $915,000 Age Not due 1-30 days past due 31-60 days past due 61-90 days past due Over 90 days past due 8.50% 30.00% 75.00% a. Record the journal entry to estimate bad debts at year-end b. Record the journal entry the following year when Dead Company goes bankrupt owing Gretel $8,000. HW Problem 7.3 -Lender Company incurred the following transactions in January: l/15 Accepted a $10,000, 60-day 8% note as extension of Late Company\'s overdue accounts receivable. 120 Loaned $50,000 to Borrower Company in exchange for a 50-day 12% note. 124 Loaned $15,000 to Brother Company in exchange for a 45-day 5% note. a. Record the preceding transactions for Lender Company assuming it uses the 360 day convention. b. Record adjusting entries January 31st and February 28th (assume Feb has 28 days). c. Record the journal entries at maturity HW Problem 7.4-Given the following information, A) calculate each company\'s receivables turnover for 2010, B) which company collects its receivables most quickly? Walmart (millions $) Target (millions $) Sears (millions$ Year Year Year Year Year Year Net Sales Cost of Sales Inventory EndingEnding Ending Ending Ending Ending 1/31/10 1/31/09 1/31/10 1/31/09 1/31/10 1/31/09 408,214 404,374 65,357 64,948 44,043 46,770 304,657 304,056 45,583 45,766 31,824 34,118 33,16034,511 7,1796,705 8,7058,795 Accounts Receivable (Net) 4,144 3,905 6,966 8,084 652 839 Total Assets 170,706163,429 44,533 44,106 24,808 25,342

Solution

Ans 7.2 Age A/R Bal % uncollectible Uncollectible Not due $550,000 1% $5,500 1-30 220000 1.80% $3,960 31-60 85000 8.50% $7,225 61-90 48000 30% $14,400 Over 90 days 12000 75% $9,000 $40,085 Ans a Dr Cr Bad debt expenses $34,085 Allowance for Doubtful Accounts $34,085 (40085-6000 (opening credit balance)) ans b Allowance for Doubtful Accounts $8,000 Accounts Receivable $8,000 ans 7.3 Tran Accounts title Dr Cr a) 15-Jan Notes Receivable $10,000 Accounts Receivable $10,000 20-Jan Notes Receivable $50,000 Cash $50,000 24-Jan Notes Receivable $15,000 Cash $15,000 b) Interest Receivable 212.5 Interest revenue 212.5 (10000*15/360*8%)+(50000*12%*10/360)+(15000*5%*6/360) c Cash (10000*8%*60/360)+10000 10133 Notes Receivable $10,000 Interest Receivable (10000*8%*15/360) 33 Interest revenue (bal fig) $100.00 Cash (50000*12%*50/360)+50000 50833.3 Notes Receivable 50000.0 Interest Receivable (50000*12%*10/360) 166.7 Interest revenue (bal fig) 666.7 Cash (15000*5%*45/360)+15000 15093.75 Notes Receivable $15,000 Interest Receivable (15000*5%*7/360) 14.583333 Interest revenue (bal fig) $79.17 ans 7.3 Accounts recievable Turnover Net sales/ Avg Accounts receivable Walmart Target Sears Net sales 408214 65357 44043 Avg Accounts receivable 4024.5 7525 745.5 (4144+3905)/2 (6966+8084)/2 (652+839)/2 Accounts recievable Turnover 101.43 8.69 59.08 b) Higher the turnover ratio better it is So Walmart collects more quickly