In: Accounting
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 $1,700 cash in full payment of Arlene’s account. |
Apr. 3. | Wrote off the $9,740 balance owed by Premier GS Co., which is bankrupt. |
July 16. | Received 30% of the $17,500 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 $2,770 cash in full payment. |
Dec. 31. | Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $7,325 ; Fogle Co., $2,175 ; Lake Furniture, $ 5,595 ; Melinda Shryer, $1,580. |
Dec. 31. | Based on an analysis of the $862,500 of accounts receivable, it was estimated that $37,500 will be uncollectible. Journalized the adjusting entry. |
Required:
1. Record the January 1 credit balance of $35,700 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 $862,500 balance in accounts receivable reflects the adjustments made during the year.
Jan. 19 | Accounts Receivable-Arlene Gurley | ||
Allowance for Doubtful Accounts | |||
Jan. 19 | Cash | ||
Accounts Receivable-Arlene Gurley | |||
Apr. 3 | Allowance for Doubtful Accounts | ||
Accounts Receivable-Premier GS Co. | |||
July 16 | Cash | ||
Allowance for Doubtful Accounts | |||
Accounts Receivable-Hayden Co. | |||
Nov. 23 | Accounts Receivable-Harry Carr | ||
Allowance for Doubtful Accounts | |||
Nov. 23 | Cash | ||
Accounts Receivable-Harry Carr | |||
Dec. 31 | Allowance for Doubtful Accounts | ||
Accounts Receivable-Cavey Co. | |||
Accounts Receivable-Fogle Co. | |||
Accounts Receivable-Lake Furniture | |||
Accounts Receivable-Melinda Shryer | |||
Dec. 31 | Bad Debt Expense | ||
Allowance for Doubtful Accounts |
2. b. Post each entry that affects the following T accounts and determine the new balances:
Allowance for Doubtful Accounts | |||
---|---|---|---|
Jan. 1 Balance | |||
Dec. 31 Adjusted Balance |
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 ½ of 1% of the sales of $5,330,000 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).
$