Question

In: Accounting

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:

a.

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]

b.

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]

c.

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 2 years ago
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