Prepare journal entries to record ABC Co. 2014 and 2015summarized transactions, and the adjusting entries to record baddebt expense at the end of each year (Dec. 31).
ABC Co. began operation Jan. 1, 2014. During the next 2 years,they completed a number of transactions involving credit sales,accounts receivable collections and bad debts. The transactions aresummerized as follows (assume a perpetual inventory system):
2014
Jan 26 - Merchandise that cost $600,000 was solde for $775,000under credit terms of n/30.
June 13 - Wrote off uncollectible accounts receivable in theamount of $16,000.
Dec 19 - Received cash of $519,000, in payment of outstandingaccounts receivable.
Dec 31 - In adjusting the accounts receivable on Dec. 31,concluded that 2.0% of the outstanding accounts receivable wouldbecome uncollectible.
2015
March 26 - ABC Co. sold merchandise for $1,145,000 under creditterms of n/60. The merchandise had cost $897,000.
Aug 15 - Wrote off uncollectible accounts receivable in theamount of $25,000.
Nov 22 - Payments of outstanding accounts received totaled$561,000.
Dec 31 - While accounts were being adjusted on Dec. 31, it wasconcluded that 2.0% of the outstanding accounts receivable wouldbecome uncollectible.
***I only need help with the Dec. 31 entry. My result is Dec.31, 2014= $20,800 & Dec. 31, 2015 = $35,200, are my answerscorrect?
Prepare journal entries to record ABC Co. 2014 and 2015summarized transactions, and the adjusting entries to record baddebt expense at the end of each year (Dec. 31).
ABC Co. began operation Jan. 1, 2014. During the next 2 years,they completed a number of transactions involving credit sales,accounts receivable collections and bad debts. The transactions aresummerized as follows (assume a perpetual inventory system):
2014
Jan 26 - Merchandise that cost $600,000 was solde for $775,000under credit terms of n/30.
June 13 - Wrote off uncollectible accounts receivable in theamount of $16,000.
Dec 19 - Received cash of $519,000, in payment of outstandingaccounts receivable.
Dec 31 - In adjusting the accounts receivable on Dec. 31,concluded that 2.0% of the outstanding accounts receivable wouldbecome uncollectible.
2015
March 26 - ABC Co. sold merchandise for $1,145,000 under creditterms of n/60. The merchandise had cost $897,000.
Aug 15 - Wrote off uncollectible accounts receivable in theamount of $25,000.
Nov 22 - Payments of outstanding accounts received totaled$561,000.
Dec 31 - While accounts were being adjusted on Dec. 31, it wasconcluded that 2.0% of the outstanding accounts receivable wouldbecome uncollectible.
***I only need help with the Dec. 31 entry. My result is Dec.31, 2014= $20,800 & Dec. 31, 2015 = $35,200, are my answerscorrect?
Related questions
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 Arleneâs account. |
| Apr. 3. | Wrote off the $15,240 balance owed by Premier GS Co., which is bankrupt. |
| July 16. | Received 25% of the $27,300 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 $4,335 cash in full payment. |
| Dec. 31. | Wrote off the following accounts as uncollectible (one entry): Cavey Co.,$11,465; Fogle Co., $3,405; Lake Furniture, $8,750; Melinda Shryer, $2,475. |
| Dec. 31. | Based on an analysis of the $1,350,100 of accounts receivable, it was estimated that $58,700 will be uncollectible. Journalized the adjusting entry. |
Required:
1. Record the January 1 credit balance of $55,900 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 $1,350,100 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 $8,340,000 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).
$
| 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).
$
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