In: Accounting
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 $48,000 | $ | 522,000 |
During 2021, credit sales were $1,840,000, cash collections from customers $1,920,000, and $57,000 in accounts receivable were written off. In addition, $4,800 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 | 70 | % | 5 | % |
61−90 days | 20 | 15 | ||
91−120 days | 5 | 20 | ||
Over 120 days | 5 | 40 | ||
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:
3. For situations (a)−(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet?