Question

TravelToday, Inc., disclosed the following rounded amounts (in thousands) concerning the Allowance for Doubtful Accounts on its Form 10-K annual report.

	Allowance for Doubtful Accounts
	(dollars in thousands)
		Beginning				Increases for				Decreases for				Ending
	Year	Balance				Bad Debt Expense				Write-Offs				Balance
	2016	$	8,200			$	3,600			$	?			$	800
	2015		7,200				4,200				3,200				8,200
	2014		11,700				500				5,000				7,200

Required:

1. 1-a. Prepare a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance.

   	Allowance for Doubtful Accounts Beg. Bal. End. Bal.

2. 1-b. Write the T-account in equation format to prove the above items account for the changes in the account.

   Write the T-account in equation format to prove the above items account for the changes in the account. (Enter your answers in thousands.)

   	Beginning Balance + – = Ending Balance + – =

3. 1-c. Record summary journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances.

4. 1-d. Supply the missing information for 2016.

5. 1-e. If TravelToday had written off an additional $22 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased?

Answer 1

Solution 1a:
Allowance for doubtful Accounts
Particulars	Debit	Credit	Balance
Beg. Bal.			$11,700.00
Bad debts expense		$500.00	$12,200.00
Write offs	$5,000.00		$7,200.00
End. Bal			$7,200.00

Solution 1b:
Beginnning Balance	+	Increase for bad debts expense	-	Decrease for write offs	=	Ending Balance
$11,700.00	+	$500.00	-	$5,000.00	=	$7,200.00

Solution 1c:
Journal Entries - Travel today Inc.
Transaction	Particulars	Debit	Credit
a	Bad debts expense Dr	$4,200.00
	To Allowance for doubtful accounts		$4,200.00
	(To record bad debts provision for 2015)
b	Allowance for doubtful accounts Dr	$3,200.00
	To Accounts receivables		$3,200.00
	(To write off receivables)

Solution 1d:
Allowance for doubtful accounts	Beginnning Balance	+	Increase for bad debts expense	-	Decrease for write offs	=	Ending Balance
2016	$8,200.00	+	$3,600.00	-	$11,000.00	=	$800.00

solution 1e:

If TravelToday had written off an additional $22 of Accounts Receivable during 2016, there will be no impact on net accounts receivables and net income.