In: Accounting
The following transactions were completed by Irvine Company during the current fiscal year ended December 31:
Feb. 8 | Received 40% of the $18,200 balance owed by DeCoy Co., a bankrupt business, and wrote off the remainder as uncollectible. |
May 27 | Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,400 cash in full payment of Seth’s account. |
Aug. 13 | Wrote off the $6,465 balance owed by Kat Tracks Co., which has no assets. |
Oct. 31 | Reinstated the account of Crawford 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 (compound entry): Newbauer Co., $7,190; Bonneville Co., $5,510; Crow Distributors, $9,410; Fiber 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. |
Record the January 1 credit balance of $25,415 in a T-account for Allowance for Doubtful Accounts. |
Allowance for Doubtful Accounts
Feb. 8 ____10920_________ Jan. 1 Balance _____25415______
Aug. 13 _______6465______ May 27 ________7400______
Dec. 31 _______23315______ Oct. 31 ______3830________
Dec. 31 Unadjusted Balance ___________________ Dec. 31 Adjusting Entry _____________
Dec. 31 Adj. Balance _______________
Bad Debt Expense
Dec. 31 Adjusting Entry ______________________
Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$_________________
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 net 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. $_______________
Allowance for Doubtful Accounts | |||
$ 25,415 | Beg Bal | ||
Feb-08 | $ 10,920 | $ 7,400 | May-27 |
Aug-13 | $ 6,465 | $ 3,830 | Oct-31 |
Dec-31 | $ 23,315 | ||
Dec-31 (unadjusted bal) |
$ 4,055 | ||
$ 40,465 | Dec-31 (adjusting) | ||
$ 36,410 | End Bal |
Account Titles | Debit | Credit |
Bad Debt Expense | $ 40,465 | |
Allowance for Doubtful Accounts | $ 40,465 |
Accounts Receivable | $ 18,20,500 |
Less : Allowance for Doubtful Accounts | $ 36,410 |
Net Realizable Value of Accounts Receivable | $ 17,84,090 |
A. Bad debt expense = $18350000 x 0.25% = $45875
B. Balance in the allowance account after the adjustment of
December 31 = $45875-4055 = $41820
C.
Accounts Receivable | $ 18,20,500 |
Less : Allowance for Doubtful Accounts | $ 41,820 |
Net Realizable Value of Accounts Receivable | $ 17,78,680 |