Question

The following transactions were completed by Daws Company during the current fiscal year ended December 31:

Jan. 29	Received 40% of the $18,200 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible.
Apr. 18	Reinstated the account of Spencer Clark, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,400 cash in full payment of Clark’s account.
Aug. 9	Wrote off the $6,465 balance owed by Iron Horse Co., which has no assets.
Nov. 7	Reinstated the account of Vinyl Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,830 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,190; DeVine Co., $5,510; Moser Distributors, $9,410; Oceanic Optics, $1,205.
Dec. 31	Based on an analysis of the $1,820,500 of accounts receivable, it was estimated that $36,410 will be uncollectible. Journalized the adjusting entry.

	Required:
1.	Record the January 1 credit balance of $25,415 in a T account for Allowance for Doubtful Accounts.
2.	A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,820,500 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses. B. Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and 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 ¼ of 1% of the sales of $18,350,000 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.

Chart of Accounts

CHART OF ACCOUNTS
Daws Company
General Ledger
ASSETS 110 Cash 111 Petty Cash 121 Accounts Receivable-Kovar Co. 122 Accounts Receivable-Spencer Clark 123 Accounts Receivable-Iron Horse Co. 124 Accounts Receivable-Vinyl Co. 125 Accounts Receivable-Beth Connelly Inc. 126 Accounts Receivable-DeVine Co. 127 Accounts Receivable-Moser Distributors 128 Accounts Receivable-Oceanic Optics 129 Allowance for Doubtful Accounts 131 Interest Receivable 132 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Store Equipment 192 Accumulated Depreciation-Store Equipment 193 Office Equipment 194 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 211 Salaries Payable 213 Sales Tax Payable 214 Interest Payable 215 Notes Payable EQUITY 310 Daws, Capital 311 Daws, Drawing 312 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Sales Salaries Expense 521 Advertising Expense 522 Depreciation Expense-Store Equipment 523 Delivery Expense 524 Repairs Expense 529 Selling Expenses 530 Office Salaries Expense 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Insurance Expense 534 Office Supplies Expense 535 Store Supplies Expense 536 Credit Card Expense 537 Cash Short and Over 538 Bad Debt Expense 539 Miscellaneous Expense 710 Interest Expense

Answer 1

1		Date	Particulars	Dr($)	Cr($)
		Jan 29	Cash (18200 x 40%)	7,280
			Allowance for Doubtful Accounts	10,920
			Accounts Receivable—Kovar Co.		18,200
		Apr 18	Accounts Receivable—Spener Clark	7,400
			Allowance for Doubtful Accounts		7,400
		Apr 18	Cash	7,400
			Accounts Receivable—Spencer Clark		7,400
		Aug 9	Allowance for Doubtful Accounts	6,465
			Accounts Receivable—Iron Horse Co.		6,465
		Nov 7	Accounts Receivable—Vinyl Co.	3,830
			Allowance for Doubtful Accounts		3,830
		Nov 7	Cash	3,830
			Accounts Receivable—Vinyl Co.		3,830
		Dec 31	Allowance for Doubtful Accounts	23,315
			Accounts Receivable—Beth Connelly Inc.		7,190
			Accounts Receivable—DeVine Co.		5,510
			Accounts Receivable—Moser Distributors		9,410
			Accounts Receivable—Oceanic Optics		1,205
		Dec 31	Bad Debt Expense	40,465
			Allowance for Doubtful Accounts		40,465
			Uncollectible accounts estimate
			adjustment required ($36,410 + $4,055).
2	Allowance for Doubtful Accounts
	Jan 29			10,920	Jan 1		Balance	25,415
	Aug 9			6,465	Apr 18			7,400
	Dec 31			23,315	Nov 7			3,830
	Dec 31		Unadjusted Balance	4,055
					Dec 31		Adjusting Entry	40,465
					Dec 31		Adj. Balance	36,410
	Bad Debt Expense
	Dec 31		Adjusting Entry	40,465
3	$1,784,090 ($1,820,500 – $36,410)
4	a.	$45,875 ($18,350,000 × 0.0025)
	b.	$41,820 ($45,875 – $4,055)
	c.	$1,778,680 ($1,820,500 – $41,820)