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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: Bad debt expense is estimated to be 4% of credit sales for the year. 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. 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?

Respuesta :

obasola1

Answer:

1. Raintree Cosmetic Company :

Account Titles                                               Debit          Credit

$ $

Allowance for Uncollectible Accounts               57,000  

Accounts Receivable                                                           57,000

To record write-off of accounts receivable  

Accounts Receivable                                       4,800  

Allowance for Uncollectible Accounts                                     4,800

To reinstate account previously written off  

Cash                                                               4,800  

Accounts Receivable                                                             4,800

To record collection of account previously written off  

2. Year end adjusting entry:

Situation Account Titles                                 Debit             Credit

a. Bad Debt Expense( $ 1,840,000 x 4%) 73,600  

Allowance for Uncollectible Accounts                                       73,600

b. Bad Debt Expense                                 47,500  

Allowance for Uncollectible Accounts                                       47,500

c. Bad Debt Expense                                   45,335  

Allowance for Uncollectible Accounts                                       45,335

3. Net Accounts Receivable To be reported on the 2021 balance sheet :

                                                      a.                   b.                           c.

Accounts Receivable              $ 433,000       $ 433,000 $ 433,000

Allowance for Uncollectible Accounts (69,400) (43,300)        (41,135)

Net Accounts Receivable     $ 363,600       $ 389,700 $ 391,865

Workings:

Aging schedule of accounts receivables:

Age of Receivables   Amount Percentage Expected    Amount Expected                                                                                                      

                                                                   Uncollectible         Uncollectible

                                             $                                            $

0 - 60 days                  303,100                       5%                  15,155

61 - 90 days                    86,600                      15 %                  12,990

91 - 120 days                     21,650                       20 %                     4,330

Over 120 days              21,650                  40%           8,660

                                           $ 433,000                                      $ 41,135

Explanation:

1. Raintree Cosmetic Company :

Account Titles                                               Debit          Credit

$ $

Allowance for Uncollectible Accounts               57,000  

Accounts Receivable                                                           57,000

To record write-off of accounts receivable  

Accounts Receivable                                       4,800  

Allowance for Uncollectible Accounts                                     4,800

To reinstate account previously written off  

Cash                                                               4,800  

Accounts Receivable                                                             4,800

To record collection of account previously written off  

2. Year end adjusting entry:

Situation Account Titles                                 Debit             Credit

a. Bad Debt Expense( $ 1,840,000 x 4%) 73,600  

Allowance for Uncollectible Accounts                                       73,600

b. Bad Debt Expense                                 47,500  

Allowance for Uncollectible Accounts                                       47,500

c. Bad Debt Expense                                   45,335  

Allowance for Uncollectible Accounts                                       45,335

3. Net Accounts Receivable To be reported on the 2021 balance sheet :

                                                      a.                   b.                           c.

Accounts Receivable              $ 433,000       $ 433,000 $ 433,000

Allowance for Uncollectible Accounts (69,400) (43,300)        (41,135)

Net Accounts Receivable     $ 363,600       $ 389,700 $ 391,865

Workings:

Aging schedule of accounts receivables:

Age of Receivables   Amount Percentage Expected    Amount Expected                                                                                                      

                                                                   Uncollectible         Uncollectible

                                             $                                            $

0 - 60 days                  303,100                       5%                  15,155

61 - 90 days                    86,600                      15 %                  12,990

91 - 120 days                     21,650                       20 %                     4,330

Over 120 days              21,650                  40%           8,660

                                           $ 433,000                                      $ 41,135

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