Question

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

Jan. 29	Received 45% of the $18,700 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible.
Apr. 18	Reinstated the account of Spencer Clark, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,270 cash in full payment of Clark’s account.
Aug. 9	Wrote off the $6,360 balance owed by Iron Horse Co., which has no assets.
Nov. 7	Reinstated the account of Vinyl Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,975 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,265; DeVine Co., $5,595; Moser Distributors, $9,305; Oceanic Optics, $1,150.
Dec. 31	Based on an analysis of the $1,759,500 of accounts receivable, it was estimated that $35,190 will be uncollectible. Journalized the adjusting entry.

	Required:
1.	Record the January 1 credit balance of $25,685 in a T account for Allowance for Doubtful Accounts.
2.	A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,759,500 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses. 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 sales of $17,710,000 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.

1.	Record the January 1 credit balance of $25,685 in a T account for Allowance for Doubtful Accounts.
2.	B. Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.

2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,759,500 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses.

3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).

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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 sales of $17,710,000 for the year, determine the following:

A. Bad debt expense for the year.

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B. Balance in the allowance account after the adjustment of December 31.

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C. Expected net realizable value of the accounts receivable as of December 31.

Answer 1

1.

Allowance for Doubtful Accounts
		Jan. 1 Balance	$       25,685

2.

Date	Account Titles	Debit	Credit	Assets	Liabilities	Equity
Jan-29	Cash	$           8,415		I
	Allowance for Doubtful Accounts	$         10,285		I
	Accounts Receivable-Kovar Co.		$           18,700	D
Apr-18	Accounts Receivable-Clark	$           7,270		I
	Allowance for Doubtful Accounts		$              7,270	D
	Cash	$           7,270		I
	Accounts Receivable-Clark		$              7,270	D
Aug-09	Allowance for Doubtful Accounts	$           6,360		I
	Accounts Receivable-Iron Horse Co.		$              6,360	D
Nov-07	Accounts Receivable-Vinyl Co.	$           3,975		I
	Allowance for Doubtful Accounts		$              3,975	D
	Cash	$           3,975		I
	Accounts Receivable-Vinyl Co.		$              3,975	D
Dec-31	Allowance for Doubtful Accounts	$         23,315		I
	Accounts Receivable-Beth Colony Inc.		$              7,265	D
	Accounts Receivable-DeVine Co.		$              5,595	D
	Accounts Receivable-Moser Distributors		$              9,305	D
	Accounts Receivable-Oceanic Optics		$              1,150	D
Dec-31	Bad Debt Expense	$         38,220				D
	Allowance for Doubtful Accounts		$           38,220	D

Allowance for Doubtful Accounts
Jan. 29	$           10,285	Jan. 1 Balance	$       25,685
Aug. 9	$              6,360	Apr. 18	$         7,270
Dec. 31	$           23,315	Nov. 7	$         3,975
Dec. 31 Unadjusted Balance	$              3,030
		Dec. 31 Adjusting Entry	$       38,220
		Dec. 31 Adj. Balance	$       35,190
Bad Debt Expense
Dec. 31 Adjusting Entry	$           38,220
Dec. 31 Balance	$           38,220

3. Net Realizable Value of Accounts Receivable = $1759500 - 35190 = $1724310

4.
A. Bad Debt Expense = $17710000 x 0.25% = $44275

B. Balance in allowance account = $44275-3030 = $41245

C. Net Realizable Value = $1759500 - 41245 = $1718255