Classic Auto Parts sells new and used auto parts. Although amajority of its sales are cash sales, it makes a significant amountof credit sales. During 2012, its first year of operations, ClassicAuto Parts experienced the following:
Sales on account$280,000 Cash sales650,000 Collections of accounts receivable265,000 Uncollectible accounts charged off duringthe year 1,200
Assume that Classic Auto Parts uses the allowance method ofaccounting for uncollectible accounts and estimates that 1 percentof its sales on account will not be collected. Answer the followingquestions:
(a) What is the Accounts Receivable balance at December 31, 2012?
(b) What is the ending balance of the Allowance for Doubtful Accountsat December 31, 2012, after all entries and adjusting entries areposted?
(c) What is the amount of uncollectible accounts expense for 2012?
(d) What is the net realizable value of accounts receivable at December31, 2012?
Classic Auto Parts sells new and used auto parts. Although amajority of its sales are cash sales, it makes a significant amountof credit sales. During 2012, its first year of operations, ClassicAuto Parts experienced the following:
Sales on account$280,000 Cash sales650,000 Collections of accounts receivable265,000 Uncollectible accounts charged off duringthe year 1,200
| Assume that Classic Auto Parts uses the allowance method ofaccounting for uncollectible accounts and estimates that 1 percentof its sales on account will not be collected. Answer the followingquestions: |
| (a) | What is the Accounts Receivable balance at December 31, 2012? |
| (b) | What is the ending balance of the Allowance for Doubtful Accountsat December 31, 2012, after all entries and adjusting entries areposted? |
| (c) | What is the amount of uncollectible accounts expense for 2012? |
| (d) | What is the net realizable value of accounts receivable at December31, 2012? |
Related questions
. A- The Connecting Company uses the percent of sales method ofaccounting for uncollectible accounts receivable. During thecurrent year, the following transactions occurred:
Sept. 7 | Connecting Company determined that the $8,100 account receivableof the Helena Company was uncollectible and wrote it off. |
Oct. 15 | Connecting Company determined that the $2,500 account receivableof the Tree Company was uncollectible and wrote it off. |
Nov. 9 | Helena Company paid $6,000 of the amount owed to the ConnectingCompany. Connecting Company does not expect further collectionsfrom the Helena Company. |
Dec. 31 | Connecting Company estimates that 0.5% of its $1,900,000 ofcredit sales would be uncollectible. |
1. Prepare the general journal entries to record thesetransactions.
If the balance of the allowance for uncollectible accounts was an$8,000 credit on January 1 of the current year, determine thebalance of the allowance for doubtful accounts at December 31 ofthe current year. Assume that the transactions above are the onlytransactions affecting the allowance for doubtful accounts duringthe year.
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. |
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