In: Accounting
Raintree Cosmetic Company sells its products to customers on a
credit basis. An adjusting entry for bad debt expense is recorded
only at December 31, the company’s fiscal year-end. The 2020
balance sheet disclosed the following:
Current assets: | ||
Receivables, net of allowance for uncollectible accounts of $37,000 | $ | 467,000 |
During 2021, credit sales were $1,785,000, cash collections from customers $1,865,000, and $42,000 in accounts receivable were written off. In addition, $3,700 was collected from a customer whose account was written off in 2020. An aging of accounts receivable at December 31, 2021, reveals the following:
Percentage of Year-End | Percent | |||
Age Group | Receivables in Group | Uncollectible | ||
0−60 days | 60 | % | 3 | % |
61−90 days | 10 | 5 | ||
91−120 days | 20 | 25 | ||
Over 120 days | 10 | 45 | ||
Required:
1. Prepare summary journal entries to account for
the 2021 write-offs and the collection of the receivable previously
written off.
2. Prepare the year-end adjusting entry for bad
debts according to each of the following situations:
3. For situations (a)−(c) in requirement 2
above, what would be the net amount of accounts receivable reported
in the 2021 balance sheet?
If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No | Event | General Journal | Debit | Credit |
---|---|---|---|---|
1 | 1 | Allowance for uncollectible accountsselected answer correct | 42,000selected answer correct | not attempted |
Accounts receivableselected answer correct | not attempted | 42,000selected answer correct | ||
2 | 2 | Accounts receivableselected answer correct | 3,700selected answer correct | not attempted |
Allowance for uncollectible accountsselected answer correct | not attempted | 3,700selected answer correct | ||
3 | 3 | Cashselected answer correct | 3,700selected answer correct | not attempted |
Accounts receivableselected answer correct | not attempted | 3,700selected answer correct |
Prepare the year-end adjusting entry for bad debts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
No | Transaction | General Journal | Debit | Credit |
---|---|---|---|---|
1 | a. | Bad debt expenseselected answer correct | 35,700selected answer correct | not attempted |
Allowance for uncollectible accountsselected answer correct | not attempted | 35,700selected answer correct | ||
2 | b. | Bad debt expenseselected answer correct | 71,400selected answer incorrect | not attempted |
Allowance for uncollectible accountsselected answer correct | not attempted | 71,400selected answer incorrect | ||
3 | c. | Bad debt expenseselected answer correct | not attempted | not attempted |
Allowance for uncollectible accountsselected answer correct | not attempted | not attempted |
For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet?
|
1) | Journal entries | ||||||||
Accouting titles & Explanations | Debit | Credit | |||||||
Allowance for uncollectible accounts | 42,000 | ||||||||
Account receivable | 42,000 | ||||||||
Account receivbale | 3,700 | ||||||||
allowance for uncollectible accouts | 3,700 | ||||||||
Cash | 3,700 | ||||||||
Account receivable | 3,700 | ||||||||
2) | Journal entries | ||||||||
Accouting titles & Explanations | Debit | Credit | |||||||
a) | Bad debts expense | 35700 | |||||||
Allowance for uncollectible accounts | 35,700 | ||||||||
(1,785,000*2%) | |||||||||
b) | Bad debts expense | 39,500 | |||||||
Allowance for uncollectible accounts | 39,500 | ||||||||
(382000*10%+1300) | |||||||||
T-account | |||||||||
Account receivable | Allowance for uncollectible | ||||||||
openint | 504000 | Cash | 1,865,000 | written off | 42,000 | opening | 37,000 | ||
Sales | 1,785,000 | writtehn off | 42,000 | reinstated | 3,700 | ||||
restated | 3,700 | collected | 3,700 | ||||||
bal | 1,300 | ||||||||
End bal | 382,000 | ||||||||
c) | Bad debts expense | 46,376 | |||||||
Allowance for uncollectible accounts | 46,376 | ||||||||
(45076+1300) | |||||||||
Age grouo | % | ||||||||
0--60 | 229200 | 3% | 6876 | ||||||
61--90 | 38200 | 5% | 1910 | ||||||
91----120 | 76400 | 25% | 19100 | ||||||
over 120 | 38200 | 45% | 17190 | ||||||
45076 | |||||||||
3) | net account | ||||||||
receivable reported | |||||||||
a | 347,600 | ||||||||
b | 343,800 | ||||||||
c | 336,924 | ||||||||