The Septemberâ30,2017â,records of Perfecto Communications include theseâ accounts:
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . .
$250,000
Allowance for Doubtful Accounts . . . . . . . . . . . . . . . . . . .
(8,300)
During theâ year,
Perfecto Communications estimatesâ doubtful-account expense atâ 1% of credit sales. Atâ year-end (Decemberâ 31), the company ages its receivables and adjusts the balance in the Allowance for Doubtful Accounts to correspond to the aging schedule. During the last quarter of 2017â, the company completed the following selectedâ transactions:
Nov 30
Wrote off as uncollectible the $1,300 account receivable from Brown Carpets and the $400 account
receivable from Priceless Antiques.
Dec 31
Adjusted the Allowance for Doubtful Accounts and recorded doubtful-account expense at year-end,
based on the aging of receivables.
Age of Accounts
Accounts Receivable
1-30 Days
31-60 Days
61-90 Days
Over 90 Days
$236,000
$135,000
$55,000
$10,000
$36,000
Estimated percent uncollectible
0.2%
2%
15%
35%
Requirement 1. Record the transactions for the last quarter of 2017 in the journal. Explanations are not required. â(Record debitsâ first, then credits. Exclude explanations from any journalâ entries.)
Wrote off as uncollectible the $1,300 account receivable from Brown Carpets and the $400 account receivable from Priceless Antiques
.
Journal Entry
Date
Accounts
Debit
Credit
Nov
30
Adjusted the Allowance for Doubtful Accounts and recordedâ doubtful-account expense atâ year-end, based on the aging of receivables.
Journal Entry
Date
Accounts
Debit
Credit
Dec
31
Requirement 2. Prepare aâ T-account for Allowance for Doubtful Accounts with the appropriate beginning balances. Post the entries from Requirement 1 to that account.
Open theâ T-account by posting the beginning balance. Then post the entries to the Allowance for Doubtful Accountsâ T-account and calculate the ending balance.
Allowance for Doubtful Accounts
Requirement 3.will report its accounts receivable in a comparative balance sheet for 2016
and 2017
.
Use theâ three-line reporting format. At December
â31, 2016
â,
theâ company's Accounts Receivable balance was $ 213 comma 000
â,
and the Allowance for Doubtful Accounts stood at $ 4 comma 700
.
Perfecto Communications
Comparative Balance Sheet (partial)
December 31, 2017 and 2016
2017
Less:
2016
Choose from any list or enter any number in the input fields and then continue to the next question.
The Septemberâ30,2017â,records of Perfecto Communications include theseâ accounts:
| Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . | $250,000 |
| Allowance for Doubtful Accounts . . . . . . . . . . . . . . . . . . . | (8,300) |
During theâ year,
Perfecto Communications estimatesâ doubtful-account expense atâ 1% of credit sales. Atâ year-end (Decemberâ 31), the company ages its receivables and adjusts the balance in the Allowance for Doubtful Accounts to correspond to the aging schedule. During the last quarter of 2017â, the company completed the following selectedâ transactions:
| Nov 30 | Wrote off as uncollectible the $1,300 account receivable from Brown Carpets and the $400 account | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| receivable from Priceless Antiques. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Dec 31 | Adjusted the Allowance for Doubtful Accounts and recorded doubtful-account expense at year-end, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| based on the aging of receivables.
Requirement 1. Record the transactions for the last quarter of 2017 in the journal. Explanations are not required. â(Record debitsâ first, then credits. Exclude explanations from any journalâ entries.) Wrote off as uncollectible the $1,300 account receivable from Brown Carpets and the $400 account receivable from Priceless Antiques .
Adjusted the Allowance for Doubtful Accounts and recordedâ doubtful-account expense atâ year-end, based on the aging of receivables.
Requirement 2. Prepare aâ T-account for Allowance for Doubtful Accounts with the appropriate beginning balances. Post the entries from Requirement 1 to that account. Open theâ T-account by posting the beginning balance. Then post the entries to the Allowance for Doubtful Accountsâ T-account and calculate the ending balance.
2016 and2017 . Use theâ three-line reporting format. AtDecember â31,2016 â, theâ company's Accounts Receivable balance was$ 213 comma 000 â, and the Allowance for Doubtful Accounts stood at$ 4 comma 700 .
Choose from any list or enter any number in the input fields and then continue to the next question. | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Related questions
The statement of financial position (balance sheet) of Advanced Technologies at 30 June 2016 reported the following:
Accounts receivableâ¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦â¦ $1,060,000
Allowance for doubtful accounts (credit balance)â¦â¦â¦â¦...... 21,600
At the end of the year, Advanced Technologies ages its accounts receivable and then adjusts the balance in the allowance for doubtful account to correspond to the aging schedule. During the year ended 30 June 2017, Advanced Technologies completed the following transactions:
Jul 14 Wrote off account receivable as uncollectible:
Grace Wong, $2,800; Design Inc., $9,600; and SM Chung,$400
Nov 22 Wrote off accounts receivable as uncollectible:
Tommy Chan, $5,200; Kathy Li, $8,400; and Beta Group, $2,800
Jun 30 Recorded uncollectible-account expense based on the aging of receivables.
Age of Accounts as at 30 June 2017
| Total | 1â 30 days | 31â60 days | 61â90 days | Over 90 days |
| 1,020,000 | $480,000 | $320,000 | $160,000 | $60,000 |
| Percentage of uncollectible | 0.5% | 1.0% | 4% | 50% |
Required
a) Record the transactions in the journal.
b) Open the allowance for doubtful accounts, and post entries affecting that account. Keep a running balance.
c) Show how Advanced Technologies should report accounts receivable on its statement of financial position (balance sheet) at 30 June 2017.
| Jan. 19. | Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalize the receipt of $2,120 cash in full payment of Arleneâs account. |
| Apr. 3. | Wrote off the $12,150 balance owed by Premier GS Co., which is bankrupt. |
| July 16. | Received 30% of the $21,800 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 $3,455 cash in full payment. |
| Dec. 31. | Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $9,135 ; Fogle Co., $2,715 ; Lake Furniture, $ 6,975 ; Melinda Shryer, $1,970. |
| Dec. 31. | Based on an analysis of the $1,074,100 of accounts receivable, it was estimated that $46,700 will be uncollectible. Journalize the adjusting entry. |
Required:
1. Record the January 1 credit balance of $44,500 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.
2. a. Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,074,100 balance in accounts receivable reflects the adjustments made during the year.
| Jan. 19-reinstate | Accounts Receivable-Arlene Gurley | ||
| Allowance for Doubtful Accounts | |||
| Jan. 19-collection | Cash | ||
| Accounts Receivable-Arlene Gurley | |||
| Apr. 3 | Allowance for Doubtful Accounts | ||
| Accounts Receivable-Premier GS Co. | |||
| July 16 | Cash | ||
| Allowance for Doubtful Accounts | |||
| Accounts Receivable-Hayden Co. | |||
| Nov. 23-reinstate | Accounts Receivable-Harry Carr | ||
| Allowance for Doubtful Accounts | |||
| Nov. 23-collection | Cash | ||
| Accounts Receivable-Harry Carr | |||
| Dec. 31-write-off | Allowance for Doubtful Accounts | ||
| Accounts Receivable-Cavey Co. | |||
| Accounts Receivable-Fogle Co. | |||
| Accounts Receivable-Lake Furniture | |||
| Accounts Payable-Melinda Shryer | |||
| Dec. 31-adjusting | Bad Debt Expense | ||
| Allowance for Doubtful Accounts |
Feedback
Set up T accounts.
Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.
In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.
The amount of bad debt expense is affected by the balance in the allowance account.
Learning Objective 4.
2. b. Post each entry that affects the following T accounts and determine the new balances:
| Allowance for Doubtful Accounts | |||
|---|---|---|---|
| Apr. 3 | Jan. 1 Balance | ||
| July 16 | Jan. 19 | ||
| Dec. 31 | Nov. 23 | ||
| Dec. 31 Unadjusted Balance | |||
| Dec. 31 Adjusting Entry | |||
| Dec. 31 Adjusted Balance | |||
| Bad Debt Expense | |||
|---|---|---|---|
Feedback
Set up T accounts.
Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.
In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.
The amount of bad debt expense is affected by the balance in the allowance account.
Learning Objective 4.
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 $6,630,000 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).
$
Feedback
Aging of Receivables; Estimating Allowance for Doubtful Accounts
Trophy Fish Company supplies flies and fishing gear products to sporting goods stores and outfitters throughout the western United States. The accounts receivable clerk for Trophy Fish prepared the following partially completed aging of receivables schedule as of the end of business on December 31, 20Y7:
| Not | Days Past Due | |||||||||||||
| Past | ||||||||||||||
| Customer | Balance | Due | 1-30 | 31-60 | 61-90 | 91-120 | Over 120 | |||||||
| AAA Outfitters | 19,900 | 19,900 | ||||||||||||
| Brown Trout Fly Shop | 7,500 | 7,500 | ||||||||||||
| Zigs Fish Adventures | 4,500 | 4,500 | ||||||||||||
| Subtotals | 1,283,400 | 740,900 | 293,200 | 113,100 | 35,100 | 22,000 | 79,100 | |||||||
The following accounts were unintentionally omitted from the aging schedule:
| Customer | Due Date | Balance | ||
|---|---|---|---|---|
| Adams Sports and Flies | May 22 | $5,100 | ||
| Blue Dun Flies | Oct. 10 | 5,200 | ||
| Cicada Fish Co. | Sept. 29 | 8,300 | ||
| Deschutes Sports | Oct. 20 | 7,500 | ||
| Green River Sports | Nov. 7 | 3,100 | ||
| Smith River Co. | Nov. 28 | 2,000 | ||
| Western Trout Company | Dec. 7 | 6,600 | ||
| Wolfe Sports | Jan. 20 | 4,300 | ||
Trophy Fish has a past history of uncollectible accounts by age category, as follows:
| Age Class | Percent Uncollectible | |
|---|---|---|
| Not past due | 1 | % |
| 1-30 days past due | 2 | |
| 31-60 days past due | 9 | |
| 61-90 days past due | 30 | |
| 91-120 days past due | 40 | |
| Over 120 days past due | 79 | |
Required:
1. Determine the number of days past due for each of the preceding accounts. If an account is not past due, enter a zero.
| Customer | Due Date | Number of Days Past Due |
| Adams Sports and Flies | May 22 | days |
| Blue Dun Flies | Oct. 10 | days |
| Cicada Fish Co. | Sept. 29 | days |
| Deschutes Sports | Oct. 20 | days |
| Green River Sports | Nov. 7 | days |
| Smith River Co. | Nov. 28 | days |
| Western Trout Company | Dec. 7 | days |
| Wolfe Sports | Jan. 20 | days |
2. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals. If an amount box does not require an entry, leave it blank.
| Trophy Fish Company | |||||||
| Aging of Receivables Schedule | |||||||
| December 31, 20Y7 | |||||||
| Customer | Balance | Not Past Due | Days Past Due 1-30 | Days Past Due 31-60 | Days Past Due 61-90 | Days Past Due 91-120 | Days Past Due Over 120 |
| AAA Outfitters | 19,900 | 19,900 | |||||
| Brown Trout Fly Shop | 7,500 | 7,500 | |||||
| Zigs Fish Adventures | 4500 | 4500 | |||||
| Subtotals | 1,283,400 | 740,900 | 293,200 | 113,100 | 35,100 | 22,000 | 79,100 |
| Adams Sports and Flies | |||||||
| Blue Dun Flies | |||||||
| Cicada Fish Co. | |||||||
| Deschutes Sports | |||||||
| Green River Sports | |||||||
| Smith River Co. | |||||||
| Western Trout Company | |||||||
| Wolfe Sports | |||||||
| Totals | |||||||
| Percent uncollectible (%) | % | % | % | % | % | % | |
| Estimate of uncollectible accounts | $ | $ | $ | $ | $ | $ | $ |
3. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule.
$
4. Assume that the allowance for doubtful accounts for Trophy Fish has a credit balance of $4,200 before adjustment on December 31, 20Y7. Journalize the adjustment for uncollectible accounts.
| Dec. 31 | |||
5. Assume that the adjusting entry in (4) was inadvertently omitted, how would the omission affect the balance sheet and income statement?
On the balance sheet, assets would be by $ because the allowance for doubtful accounts would be by $. In addition, the stockholdersâ equity (retained earnings) would be by $because bad debt expense would be and net income by $ on the income statement.
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