DIRE DAWA UNIVERSITY

COLLEGE OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE
FUNDAMENTAL OF ACCOUNTING I
WORKSHEET ON CHAPTER 5 RECEIVABLES

Work Out Problems (Show All the Necessary Computations Whenever Necessary)

P1. Top Interior Decorators issued a 120-day, 6% note for Br 24,000, dated April 10, to Finfine Furniture Company on
account.
Required:
a) Determine the due date of the note.
b) Determine the maturity value of the note.
c) Journalize the entry to record the receipt of the note by the payee
d) Journalize the entry to record receipt by the payee of payment of the note at maturity.
P2. The following selected transactions were completed by Cassic Co., a supplier of elastic bands for clothing:
2013,
Dec. 13. Received from Popular Co., on account, a Br 25,000, 120-day, 6% note dated December 13.
31. Recorded an adjusting entry for accrued interest on the note of December
31. Closed the interest revenue account. The only entry in this account originated from the December 31
adjustment.
2014,
Apr. 12. Received payment of note and interest from Popular Co.
Required: Journalize the preceding transactions.

P3. Consider the following transactions of Star Theater Productions:

July 8. Received a Br 30,000, 90-day, 8% note dated July 8 from Sky Company on account.
Oct. 6. The note is dishonored by Sky Company.
Nov. 5. Received the amount due on the dishonored note plus interest for 30 days at 10% on the total amount charged
to Sky Company on October 6.

Required: Journalize the preceding transactions.

P4. Berta Co., a building construction company, holds a 90-day, 6% note for Br 20,000, dated March 15, which was
received from a customer on account. On April 14, the note is discounted at the bank at the rate of 8%.

Required:
a) Determine the maturity value of the note.
b) Determine the number of days in the discount period.
c) Determine the amount of the discount.
d) Determine the amount of the proceeds.
e) Journalize the entry to record the discounting of the note on April 14.

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P5. Selam Company received a note from Hope Company on July 24, 2013 in settlement of an open account. The company
discounted the note at the bank on August 23, 2013. A summary of the facts concerning the note are as follows:
Face value of the note Br 360,000
Term of the note 120-days
Date of the note 24/07/13
Interest rate on the note 12%
Date of discounting the note at the bank 23/08/13
Discount rate charged by the bank 15%
Required:
1. Present the entry to record the receipt of the note.
2. Determine:
a) Due date of the note.
b) The amount of interest on the note
c) Maturity value of the note
d) The number of days from the discount date to the maturity date.
e) The amount of discount
f) Cash proceeds received by the company.
3. Present the entry to record the receipt of proceeds at the date of discount.
4. Present the entry to record if the note is dishonored and the bank charges a Br 15 protest fee for notifying
the fact the note is dishonored.

P6. The accounts of Rose Company as of December 31, 2013, show Accounts Receivable, Br 11,000; Allowance for
Doubtful Accounts, Br 100(credit balance before adjustment); Credit Sales, Br 72,500; and Sales Returns and
Allowances, Br 1,300. From past experience, uncollectible accounts are estimated at 1/2 of 1%of net credit sales.
Required:
1. Determine the amount of uncollectible accounts expense for the year.
2. Journalize the adjusting entry required at the end of the year.
3. Determine the balance of Allowance for Doubtful Accounts after adjustment.
4. Determine the net realizable value of the receivable for the year.

P7. Consider the following data:

Age Accounts Receivable Probability
(Days) Balance of collection
0-60 Br 10,000 98%
61-120 5,500 95%
121-180 2,400 90%
181-240 800 85%
241-300 180 80%
301-365 120 75%
Over 365 80 70%
Required:
1. Based on the above aging of accounts receivable, estimate the proper balance of allowance for
doubtful accounts required at end of the year.
2. Assuming that allowance for doubtful accounts has a Br 150 credit balance before adjustment,
determine:
a) the uncollectible accounts expense for the year.
b) the adjusting entry to be made at the end of the year
c) the balance of allowance for doubtful accounts after adjustment
d) the net realizable value of accounts receivable

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 3. Assuming that allowance for doubtful accounts has a Br 100 debit balance before adjustment,
determine:
a) the uncollectible accounts expense for the year.
b) the adjusting entry to be made at the end of the year
c) the balance of allowance for doubtful accounts after adjustment
d) the net realizable value of accounts receivable
4. Assuming that allowance for doubtful accounts has no balance before adjustment, determine:
a) the uncollectible accounts expense for the year.
b) the adjusting entry to be made at the end of the year
c) the balance of allowance for doubtful accounts after adjustment
d) the net realizable value of accounts receivable

P8.The accounts receivable clerk for Royal Company prepared the following partially completed aging-of-receivables
schedule as of November 30 of the preceding year.

Number of Days Past Due

Not Yet
Customer Balance Past Due 1 - 30 31 - 60 61 - 90 Over 91
ABC Co Br 2,000 Br 2,000
Alsam PLC 1,500 1,500

Zelalem Trading 5,000 5,000

Subtotals 972,500 640,000 180,000 78,500 42,300 31,700

The following accounts were unintentionally omitted from the aging schedule.

Customer Balance Due Date

Excellent Co Br 40,000 August 29
Nice PLC 8,500 September 3
Selam Trading 18,000 October 21
Top Inc 6,500 November 23
Zumra PLC 7,500 December 3
Royal Company has a past history of uncollectible accounts, as shown below.
Age Class Percentage
Uncollectible
Not past due 1%
1–30 days past due 4
31–60 days past due 8
61–90 days past due 20
Over 90 days past due 40
Required:
a) Determine the number of days past due for each of the preceding accounts.
b) Complete the aging-of-receivables schedule by including the omitted amounts.
c) Estimate the allowance for doubtful accounts; based on the aging-of-receivables schedule you completed.
d) Assume that the allowance for doubtful accounts for Royal Company has a credit balance of Br 7,180 before
adjustment on November 30. Journalize the adjusting entry for uncollectible accounts as of November 30.

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P9. Ambasel Trading Co. is a wholesaler of office supplies. An aging of the company’s accounts receivable on December 31,
2013, and a historical analysis of the percentage of uncollectible accounts in each age category are as follows:
Percentage
Age Interval Balance Uncollectible
Not past due Br 450,000 2%
1–30 days past due 110,000 4
31–60 days past due 51,000 6
61–90 days past due 12,500 20
91–180 days past due 7,500 60
Over 180 days past due 5,500 80
Br 636,500
Required:
a) Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31,
2013.
b) Assume that the allowance for doubtful accounts for Ambasel Trading Co. had a debit balance of Br 1,575
as of December 31, 2013. Journalize the adjusting entry for uncollectible accounts as of December 31,
2013.
P10. At the end of the current year, the accounts receivable account has a debit balance of Br 840,000, and net sales for the
year total Br 7,150,000.
Required:
Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following
assumptions:
a) The allowance account before adjustment has a credit balance of Br 1,780. Uncollectible accounts expense is
estimated at 1/4 of 1% of net sales.
b) The allowance account before adjustment has a credit balance of Br 2,750. An aging of the accounts in the
customer’s ledger indicates estimated doubtful accounts of Br 16,350.
c) The allowance account before adjustment has a debit balance of Br 3,050. Uncollectible accounts expense is
estimated at 1/2 of 1% of net sales.
d) The allowance account before adjustment has a debit balance of Br 3,050. An aging of the accounts in the
customer’s ledger indicates estimated doubtful accounts of Br 38,400.

P11. Click Co, a computer consulting firm, has decided to write off the Br 7,130 balance of an account owed by a customer.
Required:
Journalize the entry to record the writeoff,
a) assuming that the allowance method is used, and
b) assuming that the directwrite-off method is used.

P12.The following transactions are completed by Tana Company:

June 1. Sold merchandise on account to Awash Company for Br 5,000.
Oct. 15. Received 75% of the amount owed by Awash Company; a bankrupt business and then wrote off the
remainder as uncollectible.
Nov. 10. Reinstated the account of Awash Company that had been written- off on October 15 and received Br 1,575
cash as full payment.
Required: Journalize the above transactions in the book of Tana Company assuming that:
a) allowance method is used.
b) direct write off method is used.