Question
In: Accounting
Estimating Uncollectible Accounts and Reporting Accounts Receivable Collins Company analyzes its accounts receivable at December 31,...
Estimating Uncollectible Accounts and Reporting Accounts
Receivable
Collins Company analyzes its accounts receivable at December 31,
and arrives at the aged categories below along with the percentages
that are estimated as uncollectible.
|
Age Group |
Accounts Receivable |
Estimated Loss % |
|---|---|---|
| 0-30 days past due | $110,000 | 1% |
| 31-60 days past due | 40,000 | 2 |
| 61-120 days past due | 27,000 | 5 |
| 121-180 days past due | 14,000 | 10 |
| Over 180 days past due | 9,000 | 25 |
| Total accounts receivable | $200,000 |
The balance of the allowance for uncollectible accounts is $1,100 on December 31, before any adjustments.
(a) What amount of bad debts expense will Collins report in its income statement for the year?
(b) Use the financial statement effects template to record Collin's bad debts expense for the year.
Use negative signs with your answers, when appropriate.
(c) What is the balance of accounts receivable on it December 31 balance sheet?
Solutions
Expert Solution
| (a) What amount of bad debts expense will Collins report in its income statement for the year? [Refer working note 1] |
| $5,800 |
.
.
| (b) Use the financial statement effects template to record Collin's bad debts expense for the year. | |||||||||
| Balance Sheet | |||||||||
| Transaction | Cash Asset | + | Non-cash assets | = | Liabilities | + | Contributed Capital | + | Earned Capital |
| Record bad debts expense | $0 |
($5,800) (Allowance for Uncollectible Accounts)) |
$0 | $0 |
($5,800) (Retained earnings decrease) |
||||
.
| Income Statement | ||||
| Revenue | - | Expenses | = | Net Income |
|
$5,800 (Bad debt expense) |
($5,800) | |||
.
.
| (c) What is the balance of accounts receivable on it December 31 balance sheet? [Refer working note 3] |
| $193,100 |
.
.
| Working note 1 - Calculation of bad debt expense | |||
| Adjusted balance of Allowance for Uncollectible Accounts [Refer working note 2] | $6,900 | ||
| Less: Credit balance of Allowance for Uncollectible Accounts | $1,100 | ||
| Bad Debt Expense for the year | $5,800 | ||
| Working note 2 - Computation of adjusted balance of allowance for Uncollectible accounts | |||
| Accounts Age |
Balance (a) |
Estimated Percent Uncollectible (b) |
(a x b) |
| 0-30 days past due | $110,000 | 1% | $1,100 |
| 31–60 days past due | $40,000 | 2% | $800 |
| 61-120 days past due | $27,000 | 5% | $1,350 |
| 121 - 180 days past due | $14,000 | 10% | $1,400 |
| Over 180 days past due | $9,000 | 25% | $2,250 |
| Adjusted balance | $6,900 | ||
| Working note 3 - Balance of accounts receivable on it December 31 balance sheet | |||
| Account receivables (Gross) | $200,000 | ||
| Less: Balance of Allowance for uncollectible Account at December 31 [Refer working note 2] | $6,900 | ||
| Account receivables (Net) | $193,100 | ||
ekkarill92 answered 2 years agoRelated Solutions
LaFond Company analyzes its accounts receivable at December 31, 2016, and arrives at the aged categories...
LaFond Company
analyzes its accounts receivable at December 31, 2016, and arrives
at the aged categories below along with the percentages that are
estimated as uncollectible.
Age Group
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Estimated Loss %
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0.20%
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1.0
31-60 days past due
20,000
2.0
61-120 days past due
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5.0
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10.0
Over 180 days past due
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