Practice Problems
Demonstration problem
Solution to demonstration problem
Demonstration problem A
a.
|
1. |
2010 |
31 |
Uncollectible Accounts Expense (-SE) |
11,250 |
|
|
Dec. |
Allowance for Uncollectible Accounts (-A) |
11,250 |
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To record estimated Uncollectible accounts for the year. |
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2. |
2011 |
15 |
Allowance for Uncollectible Accounts (+A) |
750 |
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|
Jan. |
Accounts Receivable-John Nunn (-A) |
750 |
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To write off the account of John Nunn as Uncollectible. |
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3. |
12 |
Accounts Receivable-John Nunn (+A) |
750 |
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Allowance for Uncollectible Accounts (-A) |
750 |
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To correct the write-off of John Nunn's account on January 5. |
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Feb. |
12 |
Cash (+A) |
750 |
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Accounts Receivable-John Nunn (-A) |
750 |
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To record the collection of John Nunn's account receivable. |
b.
|
1. |
2010 |
15 |
Notes Receivable (+A) |
22,500 |
|
|
June |
Accounts Receivable-Stone Company (-A) |
22,500 |
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|
To record receipt of a note from Stone Company. |
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2. |
Sept. |
13 |
Accounts Receivable-Stone Company (+A) |
23,175 |
|
|
Notes Receivable (-A) |
22,500 |
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Interest Revenue (+SE) |
675 |
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To record the default of the Stone Company note of $ 22,500. Interest revenue was $ 675. |
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|
13 |
Allowance for Uncollectible Accounts* (+A) |
23,175 |
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Accounts Receivable-Stone Company (-A) |
23,175 |
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To write off the Stone Company as uncollectible. |
*This debt assumes that Notes Receivable were taken into consideration when an allowance was established. If not, the debit should be to Loss from Dishonored Notes Receivable.
Demonstration problem B
a.
|
2009 |
1 |
Cash (+A) |
9,883.33 |
|
|
Dec. |
Bank Discount ($ 10,000 x 0.07 X 101 / 36) (+A) |
116.67 |
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Notes Payable (+L) |
10,000.00 |
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|
31 |
Interest Expense (-SE) |
58.33 |
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|
Bank Discount (-A) |
58.33 |
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($ 10,000 X 0.07 X ^/ 36) |
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|
2010 |
30 |
Notes Payable (-L) |
10,000.00 |
|
|
Jan. |
Interest Expense (-SE) |
58.33 |
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|
Bank Discount (-A) |
58.33 |
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Cash (-A) |
10,000.00 |
b.
|
2010 |
2 |
Equipment (+A) |
5,000.00 |
|
|
Feb |
4 |
Notes Payable (+L) |
5,000.00 |
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|
Mar |
2 |
Notes Payable (-L) |
5,000.00 |
|
|
6 |
Interest Expense (-SE) |
37.5 |
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Cash (-A) |
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($ 5,000 X 0.09 X 30/360)=$37.50 |
5,037.50 |
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|
675 |