The information below was taken from KaibaCorp's financial record's at Dec 31, 1999, the company's year-end....

The information below was taken from KaibaCorp's financial record's at Dec 31, 1999, the company's year-end. The information was taken prior to adjusting entries and before any uncollectible accounts have been recorded.

	Debit	Credit
Accounts Receivable	$100,000
Allowances for doubtful accounts		$2,000
Sales (60% on credit)		$800,000

As well, there is the aging analysis of accounts receivable, including uncollectible accounts of $700 which are all past due over 90 days.

Status	Amount
Not past due	$50,000
Past due 1-60 days	$25,000
Past due 61-90 days	$15,000
Past due over 90 days	$10,000

Instructions:

Part 1:

a) Determine the journal entry to record uncollectible accounts at year-end.

Part 2:

Determine the adjusting journal entries to record bad debts at year-end based on the following three independent assumptions regarding bad debt percentages:

a) Based on 7% of credit sales.

b) 3% of total receivables net of uncollectible accounts.

c) Based on the aging schedule where:

	Amount	Percentage uncollectible
Not past due	$50,000	1%
Past due 1-60 days	$25,000	5%
Past due 51-90 days	$15,000	20%
Past due over 90 days	$10,000	70%

Solutions

Expert Solution

Part 1:

Account title and explanation	Debit	Credit
Allowance for doubtful accounts	$700
Accounts receivable		$700
[To record written off of uncollectibles]

Part 2:

Account title and explanation	Debit	Credit
Bad debt expense [$800,000 x 60% x 7%]	$33,600
Allowance for doubtful accounts		$33,600
[To record bad debt expense]

Account title and explanation	Debit	Credit
Bad debt expense [($100,000 - $700) x 3%]	$2,979
Allowance for doubtful accounts		$2,979
[To record bad debt expense]

Account title and explanation	Debit	Credit
Bad debt expense	$10,450
Allowance for doubtful accounts		$10,450
[To record bad debt expense]

Calculations:

Amount	Percentage uncollectible	x	% of uncollectibles	=	Total uncollebles
Not past due	$50,000	x	1%	=	$500
Past due 1-60 days	$25,000	x	5%	=	$1,250
Past due 51-90 days	$15,000	x	20%	=	$3,000
Past due over 90 days	$10,000	x	70%	=	$7,000
Total uncollectibles					$11,750


Allowance for doubtful accounts after adjustments Cr.	$11,750
Written off	$700
Allowance for doubtful accounts before adjustments Cr.	($2,000)
Bad debt expense	$10,450

ekkarill92 answered 1 year ago

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