From inception of operations to December 31, 2017, Monty Corporation provided for uncollectible accounts receivable under...

From inception of operations to December 31, 2017, Monty Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Monty’s usual credit terms are net 30 days.

The balance in Allowance for Doubtful Accounts was $147,300 at January 1, 2017. During 2017, credit sales totaled $9,061,900, the provision for doubtful accounts was determined to be $181,238, $90,619 of bad debts were written off, and recoveries of accounts previously written off amounted to $16,980. Monty installed a computer system in November 2017, and an aging of accounts receivable was prepared for the first time as of December 31, 2017. A summary of the aging is as follows.

Classification by Month of Sale	Balance in Each Category	Estimated % Uncollectible
November–December 2017	$1,265,100	2%
July–October	677,000	10%
January–June	421,600	24%
Prior to 1/1/17	157,300	74%
	$2,521,000

Based on the review of collectibility of the account balances in the “prior to 1/1/17” aging category, additional receivables totaling $61,300 were written off as of December 31, 2017. The 74% uncollectible estimate applies to the remaining $96,000 in the category. Effective with the year ended December 31, 2017, Monty adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

(a)

Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2017. Show supporting computations in good form. (Hint: In computing the 12/31/17 allowance, subtract the $61,300 write-off.)

MONTY CORPORATION Analysis of Changes in the Allowance for Doubtful Accounts For the Year Ended December 31, 2017
		$






		$

Computation of Allowance for Doubtful Accounts at December 31, 2017
Aging Category	Balance	%	Doubtful Accounts
Nov–Dec 2017	$	%	$
July–Oct		%
Jan–June		%
Prior to 1/1/17		%
			$

Required: (a) Prepare a T-account that analyzing the changes in the allowance for doubtful accounts for the year ended December 31, 2017.

(b) Prepare the journal entry for the year-end adjustment to the allowance for doubtful accounts balance as of December 31, 2017.

(c) What is the estimated net realizable value at December 31, 2017 after all the adjusting entries have been made?

Expert Solution

ekkarill92 answered 2 years ago

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