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In: Accounting
Entry for Uncollectible Accounts Easy Rider International is a wholesaler of motorcycle supplies. An aging of...
Entry for Uncollectible Accounts
Easy Rider International is a wholesaler of motorcycle
supplies. An aging of the company's accounts receivable on December
31, 20Y3, and a historical analysis of the percentage of
uncollectible accounts in each age category are as follows:
Age Interval
Balance
Percent
Uncollectible
Not past due
$1,850,000
1
%
1–30 days past due
750,000
2
31–60 days past due
100,000
6
61–90 days past due
60,000
14
91–180 days past due
45,000
60
Over 180 days past due
25,000
90
$2,830,000
Assume that the allowance for doubtful accounts for Easy Rider
International had a negative balance of $(13,300) as of December
31, 20Y3.
Illustrate the effects of the adjustment for uncollectible
accounts as of December 31, 20Y3, on the accounts and financial
statements.
If no account or activity is affected, select "No effect" from
the dropdown list and leave the corresponding number entry box
blank. Enter account decreases and cash outflows as negative
amounts.
Statement of Cash Flows
Balance Sheet
Assets
=
Liabilities
+
Stockholders' Equity
+
=
+
Dec. 31.
Statement of Cash Flows
Income Statement
Solutions
Expert Solution
Solution :
| Computation of estimated uncollectibles - Easy rider | |||
| Ageing | Accounts receivables | % Uncollectible | Estimated uncollectibles |
| Current | $1,850,000.00 | 1% | $18,500.00 |
| 1-30 days | $750,000.00 | 2% | $15,000.00 |
| 31-60 days | $100,000.00 | 6% | $6,000.00 |
| 61-90 days | $60,000.00 | 14% | $8,400.00 |
| 91-180 days | $45,000.00 | 60% | $27,000.00 |
| Over 180 days | $25,000.00 | 90% | $22,500.00 |
| $2,830,000.00 | $97,400.00 | ||
Balance in allowance for uncollectible accounts = ($13,300)
Required provision of bad debts to be recorded in financial statement = $97,400 + $13,300 = $110,700
Effect on accounts and financial statements:
Statement of cash flows:
There will be no effect on statement of cash flows as bad debts expense is non cash item and does not effect cash in any way.
Balance sheet:
Assets = -$110,700
=
Liabilities = No effect
+
Stockholder's Equity = -$110,700
Income Statement:
Bad debts expense = $110,700
ekkarill92 answered 1 year agoRelated Solutions
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