Question

The following transactions were completed by Irvine Company during the current fiscal year ended December 31:

Feb. 8	Received 40% of the $17,000 balance owed by DeCoy Co., a bankrupt business, and wrote off the remainder as uncollectible.
May 27	Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,405 cash in full payment of Seth’s account.
Aug. 13	Wrote off the $6,460 balance owed by Kat Tracks Co., which has no assets.
Oct. 31	Reinstated the account of Crawford Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,940 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,095; Bonneville Co., $5,540; Crow Distributors, $9,495; Fiber Optics, $1,035.
Dec. 31	Based on an analysis of the $1,782,000 of accounts receivable, it was estimated that $35,640 will be uncollectible. Journalized the adjusting entry.

1.	Record the January 1 credit balance of $25,615 in a T-account for Allowance for Doubtful Accounts.
2.	A. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles. B. Post each entry that affects the following selected T-accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.
3.	Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
4.	Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ¼ of 1% of the net sales of $17,760,000 for the year, determine the following: A. Bad debt expense for the year. B. Balance in the allowance account after the adjustment of December 31. C. Expected net realizable value of the accounts receivable as of December 31.

Answer 1

1)
8-Feb	Cash	Dr	6800		6800
	Accounts receivable	Cr		6800
	Allowance for uncollectibles	Dr	10200
	Accounts receivable	Cr		10200
	( to write off the balance)
27-May	Accounts receivable	Dr	7405
	Allowance for uncollectibles	Cr		7405
	Cash	Dr	7405
	Accounts receivable	Cr		7405
13-Aug	Allowance for uncollectibles	Dr	6460
	Accounts receivable	Cr		6460
	( to write off the balance)
31-Oct	Accounts receivable	Dr	3940
	Allowance for uncollectibles	Cr		3940
	Cash	Dr	3940
	Accounts receivable	Cr		3940
31-Dec	Allowance for uncollectibles	Dr	23165
	Accounts receivable	Cr		23165
	( to write off the balance)
31-Dec	Bad Debts expense	Dr	35640
	Allowance for uncollectibles	Cr		35640
2a&b)
		Allowance for uncollectibles accounts
42408	To Accounts receivable	10200	1-Jan	By balance b/d	25615
42595	To Accounts receivable	6460	27-May	By Accounts receivable	7405
42735	To Accounts receivable	23165	31-Oct	By Accounts receivable	3940
42735	To balance b/d	32160	31-Dec	By Bad debt expense	35025
		71985			71985
Bad Debt expense
31-Dec	To Allowance for uncollectibles	35025	31-Dec	By Balance c/d	35025
		Accounts Receivable
1-Jan	To balance b/d	1782000	8-Feb	By Cash	6800
27-May	To allowance for uncollectibles	7405	8-Feb	By Allowance for uncollectibles accounts	10200
31-Oct	To allowance for uncollectibles	3940	27-May	By Cash	7405
			13-Aug	By Allowance for uncollectibles accounts	6460
			31-Oct	By Cash	3940
			31-Dec	By Allowance for uncollectibles accounts	23165
			31-Dec	By Balance c/d	1735375
		1793345			1793345
3) Net balance of account receivable		1735375
4)
A)
	Net sales	17760000
	allowance ( 1/4 of 1%)	44400
	Bad Debt expense	44400
B)
		Allowance for uncollectibles accounts
8-Feb	To Accounts receivable	10200	1-Jan	By balance b/d	25615
13-Aug	To Accounts receivable	6460	27-May	By Accounts receivable	7405
31-Dec	To Accounts receivable	23165	31-Oct	By Accounts receivable	3940
31-Dec	To balance b/d	41535	31-Dec	By Bad debt expense	44400
		81360			81360
	Balance in allowance account	41535
C)
		Accounts Receivable
42370	To balance b/d	1782000	8-Feb	By Cash	6800
42517	To allowance for uncollectibles	7405	8-Feb	By Allowance for uncollectibles accounts	10200
42674	To allowance for uncollectibles	3940	27-May	By Cash	7405
			13-Aug	By Allowance for uncollectibles accounts	6460
			31-Oct	By Cash	3940
			31-Dec	By Allowance for uncollectibles accounts	23165
			31-Dec	By Balance c/d	1735375
		1793345			1793345
	Net realizable value of accounts receivable		1735375