Question

In: Accounting

The following transactions were completed by Wild Trout Gallery during the current fiscal year ended December 31

Allowance method entries 

The following transactions were completed by Wild Trout Gallery during the current fiscal year ended December 31: 

Jan. 19. Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1,965 cash in full payment of Arlene's account. 

Apr. 3. Wrote off the $11,260 balance owed by Premier GS Co., which is bankrupt. 

July 16. Received 25% of the $20,200 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible. 

Nov. 23. Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,205 cash in full payment. 

Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $8,470 ; Fogle Co., 52,515; Lake Furniture, $ 6,465; Melinda Shryer, $1,825. 

Dec. 31. Based on an analysis of the $998, 200 of accounts receivable, it was estimated that $43,400 will be uncollectible. Journalized the adjusting entry. 


Required: 

1. Record the January 1 credit balance of $41,300 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts. 

2.a. Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the 5998, 200 balance in accounts receivable reflects the adjustments made during the year.

2.b. Post each entry that affects the following T accounts and determine the new balances: 

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 12 of 1% of the sales of $6,160,000 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 (after all of the adjustments and the adjusting entry). 


Allowance method entries The following transactions were completed by Wild Trout Gallery during the current fiscal year endedAccounts Receivable-Harry Carr Allowance for Doubtful Accounts Nov. 23 Cash Accounts Receivable-Harry Carr Dec. 31 A Allowanc2. b. Post each entry that affects the following T accounts and determine the new balances: Allowance for Doubtful Accounts J3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and



Solutions

Expert Solution

Answer 1

Transactions under the allowance method
Date Account title Debit Credit
Jan 19 Accounts receivable - Arlene Gurley $          1,965
Allowance for Doubtful Accounts $          1,965
To reinstate Accounts receivable.
Jan 19 Cash $          1,965
Accounts receivable - Arlene Gurley $          1,965
To record Collection on account.
Apr 3 Allowance for Doubtful Accounts $        11,260
Accounts receivable -GS. CO $        11,260
To record account write off.
July 16 Cash (20200*25%) $       5,050
Allowance for Doubtful Accounts (20200-5050) $     15,150
Accounts receivable - Hayden Co. $     20,200
To record collection from customer and remainder amount is write off.
Nov 23 Accounts receivable - Harry Car $          3,205
Allowance for Doubtful Accounts $          3,205
To reinstate Accounts receivable.
Nov 23 Cash $          3,205
Accounts receivable - Harry Car $          3,205
To record Collection on account.
Dec 31 Allowance for Doubtful Accounts $     19,275
Accounts receivable -Cavey Co $       8,470
Accounts receivable - Fogle Co $       2,515
Accounts receivable - Lake Furniture $       6,465
Accounts receivable - Melinda shryer $       1,825
To record accounts write off.
Dec 31 Bad debt expense $        42,615
Allowance for Doubtful Accounts $        42,615
To record bad debts expense.
Allowance for Doubtful Accounts $       41,300
Add Reinstate Accounts receivable (Jan 19) $         1,965
Less Account write off (Apr 3) $     (11,260)
Less Account write off (July 16) $     (15,150)
Add Reinstate Accounts receivable (Nov 23) $         3,205
Less Account write off (Dec 31) $     (19,275)
Unadjusted credit balance of Allowance for Doubtful Accounts $             785
Adjusted credit balance of Allowance for Doubtful Accounts $       43,400
Less: Unadjusted credit balance of Allowance for Doubtful Accounts $             785
Adjustment entry for bad debts expense $       42,615

Answer 2

Allowance for Doubtful Accounts
Apr 3 $        11,260 Jan 1. Balance $        41,300
July 16 $        15,150 Jan 19 $          1,965
Dec 31 $        19,275 Nov 23 $          3,205
Dec 31. Unadjusted Balance $              785
Dec 31. Adj Entry $        42,615
Dec 31. Adjusted Balance $        43,400
Bad debt expense
Dec 31. Adj Entry $        42,615

Answer 3

Accounts receivable $     998,200
Less: Adjusted credit balance of Allowance for Doubtful Accounts $     (43,400)
Net realizable value of accounts receivable $     954,800

Answer 4

Bad debts expense (6160000*1%*1/2) $        30,800
Unadjusted credit balance of Allowance for Doubtful Accounts $              785
Add: Adjustment entry for bad debts expense $        30,800
Balance in allowance account after adjustment of December 31 $        31,585
Accounts receivable $     998,200
Less: Adjusted credit balance of Allowance for Doubtful Accounts $     (31,585)
Net realizable value of accounts receivable $     966,615

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