Question

Answer all, show work：

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 $49,000	$	527,000

During 2021, credit sales were $1,845,000, cash collections from customers $1,925,000, and $58,000 in accounts receivable were written off. In addition, $4,900 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:

1. Bad debt expense is estimated to be 2% of credit sales for the year.
2. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
3. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

3. For situations (a)−(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet?

Answer 1

1)	Journal entries
	Accouting titles & Explanations				Debit	Credit
	Allowance for uncollectible accounts				58,000
	Account receivable					58,000
	Account receivbale				4,900
	allowance for uncollectible accouts					4,900
	Cash				4,900
	Account receivable					4,900
2)	Journal entries
	Accouting titles & Explanations				Debit	Credit
a)	Bad debts expense				36900
	Allowance for uncollectible accounts					36,900
	(1,845,000*2%)
b)	Bad debts expense				47,900
	Allowance for uncollectible accounts					37,500
	(438000*10%+4100)
	T-account
	Account receivable					Allowance for uncollectible
	openint	576000	Cash	1,925,000		written off	58,000	opening	49,000
	Sales	1,845,000	writtehn off	58,000				reinstated	4,900
	restated	4,900	collected	4,900
						bal	4,100
	End bal	438,000
c)	Bad debts expense				55,784
	Allowance for uncollectible accounts					55,784
	(51684+4100)
	Age grouo			%
	0--60		262800	3%	7884
	61--90		43800	5%	2190
	91----120		87600	25%	21900
	over 120		43800	45%	19710
					51684
3)			net account
			receivable reported
	a		405,200
	b		394,200
	c		386,316