Question

The following transactions were completed by The 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 $2,155 cash in full payment of Arlene’s account.
Apr. 3.	Wrote off the $12,350 balance owed by Premier GS Co., which is bankrupt.
July 16.	Received 30% of the $22,200 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 $3,515 cash in full payment.
Dec. 31.	Wrote off the following accounts as uncollectible (one entry): Cavey Co.,$9,290; Fogle Co., $2,760; Lake Furniture, $7,090; Melinda Shryer, $2,005.
Dec. 31.	Based on an analysis of the $1,094,800 of accounts receivable, it was estimated that $47,600 will be uncollectible. Journalized the adjusting entry.

Required:

1. Record the January 1 credit balance of $45,300 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.

2. a. Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,094,800 balance in accounts receivable reflects the adjustments made during the year.

Jan. 19-reinstate	Accounts Receivable-Arlene Gurley
	Allowance for Doubtful Accounts
Jan. 19-collection	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-reinstate	Accounts Receivable-Harry Carr
	Allowance for Doubtful Accounts
Nov. 23-collection	Cash
	Accounts Receivable-Harry Carr
Dec. 31-write-off	Allowance for Doubtful Accounts
	Accounts Receivable-Cavey Co.
	Accounts Receivable-Fogle Co.
	Accounts Receivable-Lake Furniture
	Accounts Receivable-Melinda Shryer
Dec. 31-adjusting	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 $6,760,000 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).
$

Answer 1

1	Allowance for doubtful debts
			Balance	45300

2	Date	Accounts and Explanation	Debit	Credit
	19-Jan	Accounts Receivable-Arlene Gurley	2155
		Allowance for doubtful debts		2155
	19-Jan	Cash	2155
		Accounts Receivable-Arlene Gurley		2155
	13-Apr	Allowance for doubtful debts	12350
		Accounts Receivable-Premier GS Co.		12350
	16-Jul	Cash	6660
		Allowance for doubtful debts	15540
		Accounts Receivable-Hayden Co.		22200
	23-Nov	Accounts Receivable-Harry Carr	3515
		Allowance for doubtful debts		3515
	23-Nov	Cash	3515
		Accounts Receivable-Harry Carr		3515
	31-Dec	Allowance for doubtful debts	21145
		Accounts Receivable-Cavey Co.		9290
		Accounts Receivable-Fogle Co.		2760
		Accounts Receivable-Lake Furniture		7090
		Accounts Receivable-Melinda Shryer		2005
	31-Dec	Bad debt expense	42875
		Allowance for doubtful debts		42875
		= 45300+2155-12350-22200+3515-21145= -4725
		Allowance account balance before adjusting entry.
		= 47600-4725=42875

3	Net Realizable Value	1047200	= 1094800-47600
4a.	Bad debt expense for the year.	33800	= 6760000*1%*1/2
b	Balance in the allowance account after the adjustment of December 31.	38525	= 33800+4725
c	Expected net realizable value of the accounts receivable as of December 31.	1056275	= 1094800-38525