4 Effect of recovering a receivable previously written off
The accounts receivable balance for Donâs Shoe Repair atDecember 31, 2014, was $87,000. Also on that date, the balance inAllowance for Doubtful Accounts was $3,000. During 2015, $2,300 ofaccounts receivable were written off as uncollectible. In addition,Donâs Shoe Repair unexpectedly collected $130 of receivables thathad been written off in a previous accounting period. Sales onaccount during 2015 were $218,000, and cash collections fromreceivables were $220,000. Uncollectible accounts expense wasestimated to be 1 percent of the sales on account for the period.Also on that date, the balance in Allowance for Doubtful Accountswas $3,000 and the balance in Retained Earnings was $84,000.
Required
a. Organize the information in accounts under an accountingequation. (Show effect on the accounting equation in theorder provided in the question. Enter any decreases to accountbalances with a minus sign. Select "NA" if there is no effect onthe "Accounts Titles for Retained Earnings".)
Cash + Accounts Receivable - Allowance = Liabilities +Equity/Retained Earnings Accounts Titles for
Retained Earnings
1
2a
2b
3
4
5
b Based on the precedinginformation, compute (after year-end adjustment): (1) Balance of Allowance forDoubtful Accounts at December 31, 2015. (2) Balance of AccountsReceivable at December 31, 2015. (3) Net realizable value ofAccounts Receivable at December 31, 2015.
ALLOWANCE FOR DOUBTFUL ACCOUNTS ( )
ACCOUNTS RECEIVABLE ( )
NET REALIZED VALUE ( )
c What amount of uncollectible accounts expense will Donâs ShoeRepair report for 2015?
UNCOLLECTIBLE ACCOUNTS EXPENSE ( )
4 Effect of recovering a receivable previously written off
The accounts receivable balance for Donâs Shoe Repair atDecember 31, 2014, was $87,000. Also on that date, the balance inAllowance for Doubtful Accounts was $3,000. During 2015, $2,300 ofaccounts receivable were written off as uncollectible. In addition,Donâs Shoe Repair unexpectedly collected $130 of receivables thathad been written off in a previous accounting period. Sales onaccount during 2015 were $218,000, and cash collections fromreceivables were $220,000. Uncollectible accounts expense wasestimated to be 1 percent of the sales on account for the period.Also on that date, the balance in Allowance for Doubtful Accountswas $3,000 and the balance in Retained Earnings was $84,000.
Required |
a. | Organize the information in accounts under an accountingequation. (Show effect on the accounting equation in theorder provided in the question. Enter any decreases to accountbalances with a minus sign. Select "NA" if there is no effect onthe "Accounts Titles for Retained Earnings".) Cash + Accounts Receivable - Allowance = Liabilities +Equity/Retained Earnings Accounts Titles for Retained Earnings 1 2a 2b 3 4 5 |
b Based on the precedinginformation, compute (after year-end adjustment): | |
(1) Balance of Allowance forDoubtful Accounts at December 31, 2015. | |
(2) Balance of AccountsReceivable at December 31, 2015. | |
(3) Net realizable value ofAccounts Receivable at December 31, 2015. |
|