Question

For the Question below, refer to the following fact scenario for Papa Johns Corp. at December 31, 2016:

Net Credit Sales: $3,250,000

Accounts Receivable: $400,000

Allowance for Doubtful Accounts (Before any adjustment at year-end): $2300 debit

1) Assume that the accounts for Papa Johns performed an aging of Accounts Receivable and determined the following:

AGE Amount % Estimated Uncollectible

Not yet due $320000 5%

0-60 days past due $50000 40%

>60 days past due $30000 60%

The entry to adjust for estimated bad debts at December 31, 2019 would be:

a)After the entry above, what is the amount of net realizable receivables?

b)After the entry in a) above, what is the amount showing on the Income Statement as Bad Debt Expense?

c) On January 10, 202, Papa Johns Corp, determined that one receivable, in the amount of $2200, was not going to be collectible. The entry to write off this receivable is as follows:

d) If the balance in the account Allowance for Doubtful Accounts was a $1800 credit, before any adjustment (rather than a $2300 debit), the entry to adjust for estimated bad debts at December 31, 2019 would be:

e) The account Allowance for Doubtful Accounts typically has a ____________ (debit or credit) balance

Answer 1

	Age		Amount	Estimated	uncollectible
	Not yet due		320,000	5%	16000
	0-60 days		50,000	40%	20000
	more than 60 days		30,000	60%	18000
	total		400,000		54000
a)	Date	Account titles & Explanations				Debit	Credit
	12/31/2019	Bad debts expense				56300
		Allowance for Doubtful accounts					56300
		(54000+2300)
		Amount of net realizable receivables
		Account receivable					400,000
		less Allowance for Doubtful accounts					54000
		Amount of net realizable receivables					346,000	answer
b)	Bad debts expense (income statement)					56300
c)	Date	Account titles & Explanations				Debit	Credit
	1/10/2020	Allowance for Doubtful accounts				2,200
		Account receivable					2,200
d)	Date	Account titles & Explanations				Debit	Credit
	12/31/2019	Bad debts expense				52200
		Allowance for Doubtful accounts					52200
		(54000-1800)
e)	Credit balance