In: Accounting
Entries Related to Uncollectible Accounts
The following transactions were completed by The Wild Trout
Gallery during the current fiscal year ended December 31:
Jan. 19. | Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalized the receipt of $2,660 cash in full payment of Arlene's account. |
Apr. 3. | Wrote off the $12,750 balance owed by Premier GS Co., which is bankrupt. |
July 16. | Received 25% of the $22,000 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible. |
Nov. 23. | Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $4,000 cash in full payment. |
Dec. 31. | Wrote off the following accounts as uncollectible (one entry): Cavey Co., $3,300; Fogle Co., $8,100; Lake Furniture, $11,400; Melinda Shryer, $1,200. |
Dec. 31. | Based on an analysis of the $2,350,000 of accounts receivable, it was estimated that $60,000 will be uncollectible. Journalized the adjusting entry. |
Required:
1. Record the January 1 credit balance of $50,000 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.
2. a. Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $2,350,000 balance in accounts receivable reflects the adjustments made during the year.
Jan. 19-reinstate | |||
Jan. 19-collection | |||
Apr. 3 | |||
July 16 | |||
Nov. 23-reinstate | |||
Nov. 23-collection | |||
Dec. 31-write-off | |||
Dec. 31-adjusting | |||
2. b. Post each entry that affects the following T accounts and determine the new balances:
Allowance for Doubtful Accounts | |||
---|---|---|---|
Jan. 1 Balance | |||
Dec. 31 Adjusted Balance |
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 ½ of 1% of the sales of $15,800,000 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 (after all of the adjustments and the adjusting
entry).
$