Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 8 Receivables 381

The following selected transactions were taken from the records of Kemper Company for the

year ending December 31, 2008:

Feb. 2 Wrote off account of L. Armstrong, $7,250.

May 10 Received $4,150 as partial payment on the $8,500 account of Jill Knapp. Wrote off the

remaining balance as uncollectible.

Aug. 12 Received the $7,250 from L. Armstrong, which had been written off on February 2.

Reinstated the account and recorded the cash receipt.

Sep. 27 Wrote off the following accounts as uncollectible (record as one journal entry):

Kim Whalen $4,400

Brad Johnson 2,210

Angelina Quan 1,375

Tammy Newsome 2,850

Donna Short 1,690

Dec. 31 The company provided the following aging schedule for its accounts receivable:

Aging Class (Number Receivables Balance Estimate of the Percentage of

of Days Past Due) on December 31 Receivables That Will Become Uncollectible

0–30 days $160,000 3%

31–60 days 40,000 10

61–90 days 18,000 20

91–120 days 11,000 40

More than 120 days 6,500 75

Total receivables $235,500

a. Journalize the transactions for 2008 under the direct write-off method.

b. Journalize the transactions for 2008 under the allowance method, presuming that the

allowance account had a beginning balance of $18,000 and the company uses the analysis

of receivables method.

c. How much higher (lower) would Kemper’s 2008 net income have been under the direct

write-off method than under the allowance method?

Determine the due date and the amount of interest due at maturity on the following notes:

Date of Note Face Amount Term of Note Interest Rate

a. March 6 $15,000 60 days 9%

b. May 20 8,000 60 days 10

c. June 2 5,000 90 days 12

d. August 30 18,000 120 days 10

e. October 1 10,500 60 days 12

Holsten Interior Decorators issued a 90-day, 9% note for $25,000, dated April 6, to Maderia

Furniture Company on account.

a. Determine the due date of the note.

b. Determine the maturity value of the note.

c. Journalize the entries to record the following: (1) receipt of the note by the payee and (2)

receipt by the payee of payment of the note at maturity.

The series of seven transactions recorded in the following T-accounts were related to a sale to a

customer on account and the receipt of the amount owed. Briefly describe each transaction.

Exercise 8-18

Entries for bad debt expense
under the direct write-off and
allowance methods

Goal 5

Exercise 8-19

Determine due date and
interest on notes

Goal 6

a. May 5, $225

Exercise 8-20

Entries for notes receivable

Goal 6

b. $25,562.50

Exercise 8-21

Entries for notes receivable

Goal 6