Practice Problems

Complete the practice problems. Check your answers after you finish.

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

     

To record estimated Uncollectible accounts for the year.

   

2.

2011

15

Allowance for Uncollectible Accounts (+A)

750

 
 

Jan.

 

Accounts Receivable-John Nunn (-A)

 

750

     

To write off the account of John Nunn as Uncollectible.

   

3.

 

12

Accounts Receivable-John Nunn (+A)

750

 
     

Allowance for Uncollectible Accounts (-A)

 

750

     

To correct the write-off of John Nunn's account on January 5.

   
 

Feb.

12

Cash (+A)

750

 
     

Accounts Receivable-John Nunn (-A)

 

750

     

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

     

To record receipt of a note from Stone Company.

   

2.

Sept.

13

Accounts Receivable-Stone Company (+A)

23,175

 
     

Notes Receivable (-A)

 

22,500

     

Interest Revenue (+SE)

 

675

     

To record the default of the Stone Company note of $ 22,500. Interest revenue was $ 675.

   
   

13

Allowance for Uncollectible Accounts* (+A)

23,175

 
     

Accounts Receivable-Stone Company (-A)

 

23,175

     

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

 
   

Notes Payable (+L)

 

10,000.00

 

31

Interest Expense (-SE)

58.33

 
   

Bank Discount (-A)

 

58.33

   

($ 10,000 X 0.07 X ^/ 36)

   

2010

30

Notes Payable (-L)

10,000.00

 

Jan.

 

Interest Expense (-SE)

58.33

 
   

Bank Discount (-A)

 

58.33

   

Cash (-A)

 

10,000.00

 

b.

2010

2

Equipment (+A)

5,000.00

 

Feb

4

Notes Payable (+L)

 

5,000.00

Mar

2

Notes Payable (-L)

5,000.00

 
 

6

Interest Expense (-SE)

37.5

 
   

Cash (-A)

   
   

($ 5,000 X 0.09 X 30/360)=$37.50

 

5,037.50

       

675