From inception of operations to December 31, 2017, Collin, Inc. provided for uncollectible accounts receivable under...

From inception of operations to December 31, 2017, Collin, Inc. provided for uncollectible accounts receivable under the allowance method: provisions were made monthly at 1% of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Collin’s usual credit terms are net 30 days.

The balance in Allowance for Doubtful Accounts was $86,000 at January 1, 2017. During 2017, credit sales totaled $6,200,000,interim provisions for doubtful accounts were made at 1% of credit sales, $47,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $3,000. Collin installed a computer system in November 2017, and an aging of accounts receivable was prepared for the first time as of December 31, 2017. A summary of the aging is as follows.

Classification by Balance in Estimated %

Month of Sale Each Category Uncollectible

November–December 2017 $ 760,000 1%

July–October 201,000 8%

January–June 89,000 30%

Prior to 1/1/2017 80,000 90%

$1,130,000

Based on the review of collectability of the account balances in the “prior to 1/1/2017” aging category, additional receivables totaling $30,000 were written off as of December 31, 2017. The 90% uncollectible estimate applies to the remaining $50,000 in the category. Effective with the year ended December 31, 2017, Collin adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

Instructions(a) Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2017.Show supporting computations in good form. (Hint: In computing the 12/31/2017 allowance, subtract the $30,000 write-off).

(b) Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts balance as of December31, 2017.

Solutions

Expert Solution

Solution
A

B. Journal entries for Year end adjustment to the allowance for doubtful accounts at 31.12.2017

Particulars	Debit in $	Credit in $
Bad debt expenses	21380
To Allowance for doubtfull accounts		21380
(Being year end Bad debt expanse recognised )

ekkarill92 answered 1 year ago

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