Question

In: Accounting

The Dent Sign Company uses the allowance method in accounting for uncollectible accounts. The company uses...

The Dent Sign Company uses the allowance method in accounting for uncollectible accounts. The company uses income statement approach to estimate uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31, 2017, and December 31, 2018, appear below:

12/31/1712/31/18

Net Credit Sales$400,000$500,000

Accounts Receivable75,000100,000

Allowance for Doubtful Accounts5,000?

Instructions

(a)Record the following events in 2018.

Aug.10Determined that the account of Ann Koch for $1,000 is uncollectible.

Sept.12Determined that the account of Joe Yates for $4,000 is uncollectible.

Oct.10Received a check for $550 as payment on account from Ann Koch, whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.

Nov.15Received a check for $450 from Ann Koch as payment on her account.

(b)Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2018.

(c)What is the balance of Allowance for Doubtful Accounts at December 31, 2018?


*can i have an explanation for B and C

Solutions

Expert Solution

Solution:
a.
Date General Journal Debit Credit
Aug. 10 Allowance for Doubtful Accounts 1,000
Accounts Receivable—Ann Koch 1,000
[Being Accounts Receivable—Ann Koch is written off]
Sept. 12 Allowance for Doubtful Accounts 4,000
Accounts Receivable—Joe Yates 4,000
[Being Accounts Receivable—Joe Yates is written off]
Date General Journal Debit Credit
Oct. 10 Accounts Receivable—Ann Koch 1,000
Allowance for Doubtful Accounts 1,000
[Being account of Ann Koch reinstated previously written off ]
Cash 550
Accounts Receivable—Ann Koch 550
[Being cash collection from Ann Koch recorded ]
Date General Journal Debit Credit
Nov. 15 Cash 450
Accounts Receivable—Ann Koch 450
[Being cash collection from Ann Koch recorded ]
b.
Date General Journal Debit Credit
Dec. 31 Bad Debts Expense 5,000
Allowance for Doubtful Accounts 5,000
[Being Bad debt expense recorded based on estimation of uncollectible account]
Working Notes:
Past experience indicates that 1% of net credit sales will eventually be uncollectible
Hence, only 1% of Net credit sales of 2018
Bad Debts Expense = 1% x $500,000 = $5,000
c. Balance of Allowance for Doubtful Accounts at December 31, 2018 $6,000
Working Notes:
Computation of balance of Allowance for Doubtful Accounts at December 31, 2018
Opening balance 31/12/2017 5,000
Add: Created during 2018 5,000
Less: Amount written off Joe Yates -4,000
Allowance for Doubtful Accounts at December 31, 2018 6,000
Please feel free to ask if anything about above solution in comment section of the question.

Related Solutions

The Garvey Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates...
The Garvey Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 6% of accounts receivable will eventually be uncollectible. Selected account balances at December 31, 2019, and December 31, 2020, appear below: 12/31/2019 12/31/2020 Net Credit Sales $425,000 $500,000 Accounts Receivable 80,000 100,000 Allowance for Doubtful Accounts 4,000 ? Instructions: (a) Record the following events in 2020. Omit explanations. 8pts Aug. 10 - Determined that the account of Kurt West for $900 is uncollectible....
Abbott company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of...
Abbott company uses the allowance method of accounting for uncollectible accounts. Abbott estimates that 3% of credit sales will be uncollectible. On January 1, the allowance for doubtful accounts had a credit balance of $3,400. During the year, Abbott wrote-off accounts receivable totaling $2,400, and made credit sales of $118,000. After the adjusting entry, the December 31 balance in bad debt expense would be A. $3540 B. $6940 C. $4540 D. $3400
Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable....
Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler company are as follows: Feb 1          Sold merchandise on account to Ames Co., $8000. The cost of the merchandise sold was $4500 Mar. 15      Accepted a 60-day, 12% note for $8000 from Ames Co. on account Apr. 9        Wrote off a $2500 account from Dorset Co. as uncollectible Apr. 21       Loaned $7500 cash to Jill Klein, receiving a 90-day,...
Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable....
Ditzler Company, a construction supply company, uses the allowance method of accounting for uncollectible accounts receivable. Selected transactions completed by Ditzler company are as follows: Feb 1          Sold merchandise on account to Ames Co., $8000. The cost of the merchandise sold was $4500 Mar. 15      Accepted a 60-day, 12% note for $8000 from Ames Co. on account Apr. 9        Wrote off a $2500 account from Dorset Co. as uncollectible Apr. 21       Loaned $7500 cash to Jill Klein, receiving a 90-day,...
Ervin Company uses the allowance method to account for uncollectible accounts receivable
Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2021, net credit sales totaled $5,900,000, and the estimated bad debt percentage is 1.50%. No previously written-off accounts receivable were reinstated during 2021. The allowance for uncollectible accounts had a credit balance of $56,000 at the beginning of 2021 and $47,000, after adjusting entries, at the end of 2021.Required:1. What is bad debt expense for 2021...
Ariel Inc. uses the allowance method of accounting for uncollectible accounts receivable and estimates that 2%...
Ariel Inc. uses the allowance method of accounting for uncollectible accounts receivable and estimates that 2% of the credit sales of $1,650,000 for the year ended will be uncollectible. Allowance for Doubtful Accounts has a negative unadjusted balance of $(1,600) at the end of the year. Determine the amount of the adjustment to record the provision for doubtful accounts.
Sunland Company uses the allowance method to estimate uncollectible accounts receivable. The unadjusted balance in Allowance...
Sunland Company uses the allowance method to estimate uncollectible accounts receivable. The unadjusted balance in Allowance for Doubtful Accounts is a debit of $5,000. The company produced the following information from aging its accounts receivable at year end. Complete the aging schedule and calculate the total estimated uncollectible accounts. Number of Days Outstanding Total 0–30 31–60 61–90 91–120 Accounts receivable $580,000 $330,000 $120,000 $80,000 $50,000 Estimated % uncollectible 2% 6% 10% 30% Estimated uncollectible accounts $ $ $ $ $...
Under the allowance method for uncollectible accounts
Under the allowance method for uncollectible accounts (a) the net realizable value of accounts receivable is greater before an account is written off than after it is written off. (b) Bad Debts Expense is debited when a specific account is written off as uncollectible. (c) the net realizable value of accounts receivable in the statement of financial position is the same before and after an account is written off. (d) Allowance for Doubtful Accounts is closed each year to Income...
for a budiness that uses the allowance method of accounting for uncollectible recivables: Required:(a) Journalize the...
for a budiness that uses the allowance method of accounting for uncollectible recivables: Required:(a) Journalize the entries to record the following: (1) Journalize the entries to record the following: (1) Record the adjusting entry at December31, the end of the first fiscal year, to record the bad dept expense.The accounts receivable account has a balance of $800,000, and th contra asset account before adjustment had a debt balance $600. Analysis of the receivables indicate in collectible receivables of $18,000. (2)...
Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is...
Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2021, net credit sales totaled $5,400,000, and the estimated bad debt percentage is 1.50%. No previously written-off accounts receivable were reinstated during 2021. The allowance for uncollectible accounts had a credit balance of $51,000 at the beginning of 2021 and $44,500, after adjusting entries, at the end of 2021. Required: 1. What is bad debt expense for 2021...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT