The following information is available at December 31st for Byron Inc.: Number of Days Outstanding Accounts...

The following information is available at December 31st for Byron Inc.:

Number of Days Outstanding	Accounts Receivable	Estimated Percentage Uncollectable
1-30 days	$85,000	5%
31-60 days	25,000	15%
61 - 90 days	10,000	25%
Total	120,000

Instructions

Calculate the estimated value of uncollectible accounts and the net realizable value of Byron’s accounts receivable at December 31st.

Prepare the adjusting journal entry at December 31st to record bad debt expense given that the Allowance for Doubtful Accounts has a credit balance of $2,000 prior to any adjustments.

Prepare the required journal entry if Byron Inc. learns that $2,500 from Galt Supplies Ltd. Is not collectible.

Prepare the required journal entry if Bryon Inc. subsequently collects the $2,500 from Galt Supplies Ltd. that was previously written off.

Expert Solution

Calculate estimated value of uncollectible accounts :

Days	Account receivable	Estimated Percentage Uncollectable	Estimated Amount Uncollectable
1-30 days	85000	5%	4250
31-60 days	25000	15%	3750
61-90 days	10000	25%	2500
Total	120000		10500

Net realizable value = 120000-10500 = $109500

b) Adjusting entry :

Date	account & explanation	debit	credit
	Bad debt expense (10500-2000)	8500
	Allowance for doubtful accounts		8500
	(To record adjusting entry)

c) Journal entry :

Date	account & explanation	debit	credit
	Allowance for doubtful accounts	2500
	Account receivable		2500
	(To record write off)

d) Journal entry :

Date	account & expalantion	debit	credit
	Account receivable	2500
	Allowance for doubtful accounts		2500
	(To record amount reinstated)

	Cash	2500
	Account receivable		2500
	(To record cash collection)

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