Question

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

Jan. 29	Received 40% of the $17,000 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 $7,405 cash in full payment of Clark’s account.
Aug. 9	Wrote off the $6,460 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 $3,940 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,095; DeVine Co., $5,540; Moser Distributors, $9,495; Oceanic Optics, $1,035.
Dec. 31	Based on an analysis of the $1,782,000 of accounts receivable, it was estimated that $35,640 will be uncollectible. Journalized the adjusting entry.

	Required:
1.	Record the January 1 credit balance of $25,615 in a T account for Allowance for Doubtful Accounts.
2.	A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,782,000 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 $17,760,000 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.

T Accounts

1.	Record the January 1 credit balance of $25,615 in a T account for Allowance for Doubtful Accounts.
2.	B. Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.

Allowance for Doubtful Accounts
		Jan. 1 Balance
............
...........
.............
.....................................		Dec. 31 Adj. Balance

Bad Debt Expense
........................	............

Journal

2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,782,000 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.

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JOURNAL

ACCOUNTING EQUATION

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Final Questions

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 $17,760,000 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.

$............................

Answer 1

Allowance for Doubtful accounts as on Dec 31 before bad debt expense = $25615-10200+7405-6460+3940-23165 = ($2865)

1.

Allowance for Doubtful Accounts
		$                25,615	Beg Balance
			Ending Balance

2.

Date	Account Titles	Debit	Credit	Assets	Liabilities	Equity
Jan-29	Cash	$                 6,800		$                     6,800
	Allowance for Doubtful Debts	$               10,200		$                   10,200
	Accounts Receivable - Kovar Co.		$                17,000	$                 -17,000
Apr-18	Accounts Receivable - Spencer Clark	$                 7,405		$                     7,405
	Allowance for Doubtful Debts		$                  7,405	$                    -7,405
	Cash	$                 7,405		$                     7,405
	Accounts Receivable - Spencer Clark		$                  7,405	$                    -7,405
Aug-09	Allowance for Doubtful Debts	$                 6,460		$                     6,460
	Accounts Receivable - Iron Horse Co.		$                  6,460	$                    -6,460
Nov-07	Accounts Receivable - Vinyl Co.	$                 3,940		$                     3,940
	Allowance for Doubtful Debts		$                  3,940	$                    -3,940
	Cash	$                 3,940		$                     3,940
	Accounts Receivable - Spencer Clark		$                  3,940	$                    -3,940
Dec-31	Allowance for Doubtful Debts	$               23,165		$                 -23,165
	Accounts Receivable - Beth		$                  7,095	$                     7,095
	Accounts Receivable - Devine		$                  5,540	$                     5,540
	Accounts Receivable - Moser		$                  9,495	$                     9,495
	Accounts Receivable - Optics		$                  1,035	$                     1,035
Dec-31	Bad Debt Expense	$               38,505				$    -38,505
	Allowance for Doubtful Debts		$                38,505	$                 -38,505

Bad Debt Expense = $35640+2865 = $38505

Allowance for Doubtful Accounts
		$                25,615	Beg Balance
Accounts Receivable - Kovar Co.	10200	$                  7,405	Accounts Receivable - Spencer Clark
Accounts Receivable - Iron Horse Co.	6460	$                  3,940	Accounts Receivable - Vinyl Co.
Accounts Receivable - Beth	$                 7,095	$                38,505	Bad Debt Expense
Accounts Receivable - Devine	$                 5,540
Accounts Receivable - Moser	$                 9,495
Accounts Receivable - Optics	$                 1,035
		$                35,640	Ending Balance

3. Net Realizable Value of Accounts Receivable = $1782000 - 35640 = $1746360

4.
A. Bad Debt Expense = $17760000 x 0.25% = $44400
B. Balance in Allowance account = $44400-2865 = $41535
C. Net Realizable Value of Accounts Receivable = $1782000 - 41535 = $1740465