Question

1. Open Kellogg's Annual Reports See Supplemental Financial Data and find the balance in Allowance for Doubtful Accounts for the most recent year.

2.  Sigmund Company completed the following transactions in 2012:

• Jan. 9     Sold merchandise on account to Roger’s Supply, $1,200.
• Jan. 15     Wrote off the account of Pete Ramirez as uncollectible because of his death, $500.
• Mar. 17     Received $450 from Roland Co., whose account had been written off in 2011. The account was reinstated and the collection recorded.
• Apr. 9     Received 18% of the $4,100 owed by Lane Danks. The remainder was written off as uncollectible.
• June 15     The account for Mae’s Garage was reinstated for $1,500. The account was written off three years ago and collected in full today.
• Oct. 18     Prepared a compound entry to write the following accounts off as uncollectible: Jim’s Diner, $220; Kross Auto, $460; Reece’s Hardware, $800.
• Nov. 12     Sold merchandise on account to J.B. Rug, $2,200.
• Dec. 31     Based on an aging of Accounts Receivable, it was estimated that $7,000 will be uncollectible out of a total of $165,000 in Accounts Receivable.
• Dec. 31     Closed Bad Debts Expense to Income Summary.

From these transactions as well as the following additional data, complete a–c:

	Acct. No.	Balance
Allowance for Doubtful Accounts	114	$4,200
Income Summary	312
Bad Debt Expense	612

Figure 2

a. Journalize the transactions.

b. Post to Allowance for Doubtful Accounts, Income Summary, and Bad Debts Expense accounts as needed.

c. Prepare a current assets section of the balance sheet. Ending balances needed are as follows: Cash, $13,500; Accounts Receivable, $165,000; Office Supplies, $2,100; Merchandise Inventory, $105,000; Prepaid Rent, $1,350

Answer 1

a) Journal Entries for the transaction-:

Jan 9 -: Roger Supply A/c Dr. $1,200

   To Sale of Goods $1,200

(Being merchandise sale has been recorded by the Company)

Jan 15-: Bad debt A/c Dr. $500

To Pete Ramirez (Trade receivables) -: $500

(Being trade receivables non-relisable written off)

March 17-: Bank A/c Dr. $450

To Bad debt recovery A/c Dr. $450

(Being amount written in earlier years has now been collected)

April 9: Bank A/c Dr. ($4,100 X 18%) $ 738

Bad debt Expense A/c Dr. $3,362

To Lane Danks $4,100

(Being only 18% of the amount is realisable and balance not realisable)

June 15-: Bank A/c Dr. $1,500

To Bad debt recovery A/c Dr. $1,500

(Being amount written off (Mae's Garage) in earlier years has now been collected)

Oct 18-: Bad debt A/c Dr. $1,480

To Jim's Diner (Trade receivables) -: $220

  To Kross Auto (Trade receivables) -: $460

To Reece’s Hardware (Trade receivables) -: $800

(Being trade receivables non-relisable written off)

Nov 12 -: J.B. Rug A/c Dr. $2,200

   To Sale of Goods $2,200

(Being merchandise sale has been recorded by the Company)

Dec 31-: Provision for trade receivables (SPL) A/c Dr. ($7,000-$4,200) = $2,800

   To Provision for trade receivables (BS) A/c $2,800

   (Being additional provision for $2,800 has been created for the year)(

b)

	Provision for doubtful A/c
		Jan 1 By Balance b/f	$       4,200
		Dec 31 By Provision for trade receivables (SPL) A/c	$       2,800
Dec 31 To Balance c/f	$                                         7,000
	$                                         7,000		$       7,000

	Income from bad debt recovery
		March 17 By Roland Co.	$           450
		June 15 By Mae's Garage	$       1,500
Dec 31 To Statelemt of P&L	$                                         1,950
	$                                         1,950		$       1,950

	Bad debt expense
Jan 15 To Pete Ramirez	$                                            500
Apr 9 To Lane Danks	$                                         3,362
Oct 18 To Jim's Diner	$                                            220
Oct 18 To Kross Auto	$                                            460
Oct 18 To Reece’s Hardware	$                                            800	Dec 31 To Statement of P&L	$       5,342
	$                                         5,342		$       5,342

(c) Extract of Current Assets from the Balance Sheet

		Balance Sheet
Current Assets		Amount Amou
Cash and Cash Equivalents		$                                      13,500
Accounts receivable	$                                         165,000
Less-: Provision for doubtful debt	$                                            -7,000	$                                    158,000
Inventories
Office Supplies		$                                         2,100
Merchandise Inevntory		$                                    105,000
Pre-paid rent		$                                         1,350