Question

The following transactions were completed by Daws Company during the current fiscal year ended December 31: Jan. 29 Received 30% of the $18,900 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 $7,265 cash in full payment of Clark’s account. Aug. 9 Wrote off the $6,410 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 $3,980 cash in full payment of the account. Dec. 31 Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,090; DeVine Co., $5,485; Moser Distributors, $9,415; Oceanic Optics, $1,190. Dec. 31 Based on an analysis of the $1,774,000 of accounts receivable, it was estimated that $35,480 will be uncollectible. Journalized the adjusting entry. Required: 1. Record the January 1 credit balance of $25,795 in a T account for Allowance for Doubtful Accounts. 2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,774,000 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 net sales of $18,660,000 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

Part 1 and 2
DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
Jan.29	Cash	110	$5,670
	Allowance for Doubtful Accounts	129	$13,230
	Accounts Receivable-Kovar Co.	121		$18,900
Apr.18	Accounts Receivable-Spencer Clark	122	$7,265
	Allowance for Doubtful Accounts	129		$7,265
	Cash	110	$7,265
	Accounts Receivable-Spencer Clark	122		$7,265
Aug. 9	Allowance for Doubtful Accounts	129	$6,410
	Accounts Receivable-Iron Horse Co..	123		$6,410
Nov.7	Accounts Receivable-Vinyl Co.	124	$3,980
	Allowance for Doubtful Accounts	129		$3,980
	Cash	110	$3,980
	Accounts Receivable-Crawford Co	124		$3,980
Dec. 31	Allowance for Doubtful Accounts	129	$23,180
	Accounts Receivable-Beth Connelly Inc.	125		$7,090
	Accounts Receivable-DeVine Co.,	126		$5,485
	Accounts Receivable-Moser Distributors	127		$9,415
	Accounts Receivable-Oceanic Optics	128		$1,190
Dec. 31	Bad Debt Expense	538	$35,480
	Allowance for Doubtful Accounts	129		$35,480
2)
Allowance for Doubtful Accounts
Jan.29	$13,230	Jan. 1 Balance	$25,795
Aug. 9	$6,410	Apr.18	$7,265
Dec. 31	$23,180	Nov.7	$3,980
		Dec. 31 Unadjusted Balance	$5,780
		Dec. 31 Adjusting Entry	$35,480
		Dec. 31 Adj. Balance	$41,260
3)
Bad Debt Expense
Dec. 31 Adjusting Entry	$35,480
A) Bad debt expense for the year.	$35,480
B) Balance in the allowance account after the adjustment of December 31.	$41,260
3)Expected net realizable value of the accounts receivable as of December 31.
Net Realisable Value = $1,774,000 - $35,480	$1,738,520
4)
A) Bad debt expense for the year = $18,660,000 x 1/4 x 1%	$46,650.00
B) Balance in the allowance account after the adjustment of December 31 = $46,650 + $5780	$52,430.00
Net Realisable Value = $1,774,000 - $52,430	$1,721,570.00