Q1. The ledger of Macarty Company at the end of the current year shows Accounts Receivable $78,000, Credit Sales $810,000, and Sales Returns and Allowances $40,000. Instructions
(a) If Macarty uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Macarty determines that Matisse's $900 balance is uncollectible.
(b) If Allowance for Doubtful Accounts has a credit balance of $1,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.
(c) If Allowance for Doubtful Accounts has a debit balance of $500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.
Q2. On May 10, Keene Company sold merchandise for $4,000 and accepted the customer's Best Business Bank MasterCard. At the end of the day, the Best Business Bank MasterCard receipts were deposited in the company's bank account. Best Business Bank charges a 3.8% service charge for credit card sales. Instructions Prepare the entry on Keene Company's books to record the sale of merchandise. Prepare entry for credit card sale.
Q3. Suppose the following information was taken from the 2017 financial statements of FedEx Corporation, a major global transportation/delivery company.
| (in millions) |
2017 |
2016 |
| Accounts receivable (gross) |
$ 3,587 |
$ 4,517 |
| Accounts receivable (net) |
3,391 |
4,359 |
| Allowance for doubtful accounts |
196 |
158 |
| Sales revenue |
35,497 |
37,953 |
| Total current assets |
7,116 |
7,244 |
Instructions- Answer each of the following questions.
(a) Calculate the accounts receivable turnover and the average collection period for 2017 for FedEx.
(b) Is accounts receivable a material component of the company's total current assets?
(c) Evaluate the balance in FedEx's allowance for doubtful accounts.