At the beginning of the current period, Griffey Corp. had balances in Accounts R
ID: 2378427 • Letter: A
Question
At the beginning of the current period, Griffey Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $800,000 and collections of $763,000. It wrote off as uncollectible accounts receivable of $7,300. However, a $3,100 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $25,000 at the end of the period
A) Prepare the entries to record sales and collections during the period.
B) Prepare the entry to record the write-off of uncollectible accounts during this period.
C) Prepare the entries to record the recovery of the uncollectible account during the period.
D) Prepare the entry to record bad debr expense for the period.
Please help! Thanks!
Ending balance in Accounts Receivable $ Ending balance in Allowance for Doubtful Accounts $ At the beginning of the current period, Griffey Corp. had balances in Accounts Receivable of $200,000 and in Allowance for Doubtful Accounts of $9,000 (credit). During the period, it had net credit sales of $800,000 and collections of $763,000. It wrote off as uncollectible accounts receivable of $7,300. However, a $3,100 account previously written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $25,000 at the end of the period Prepare the entries to record sales and collections during the period. Prepare the entry to record the write-off of uncollectible accounts during this period. Prepare the entries to record the recovery of the uncollectible account during the period. Prepare the entry to record bad debr expense for the period. Determine the ending balances in Accounts Receivable and Allowance for Doubtful Accounts. What is the net realizable value of the receivables at the end of the period? I have a draft, but i'm not entirely sure how to do E and F.Explanation / Answer
(a) Prepare the entries to record sales and collections during the period.
Dr Accounts Receivable 800,000
Cr Sales 800,000
Dr Cash 763,000
Cr Accounts Receivable 763,000
(b) Prepare the entry to record the write-off of uncollectible accounts during the period.
Dr Allowance for Doubtful Accounts 7,000
Cr Accounts Receivable 7,000
(c) Prepare the entries to record the recovery of the uncollectible account during the
period.
Dr Accounts Receivable 3,000
Cr Allowance for Doubtful Accounts 3,000
Dr Cash 3,000
Cr Accounts Receivable 3,000
(d) Prepare the entry to record bad debts expense for the period.
If you wrote the problem out exactly as it was given to you, this is a poorly written question. When using the allowance method, there are two basis you can use. Using percentage of sales as the basis, the balance in Allowance for Doubtful Accounts is ignored. So in this example the, the Bad Debt Expense would be 25,000. Since your teacher told you the answer was 20,000, the percentage of receivables is being used as the basis. With percentage of receivables, the balance of Allowance for Doubtful Accounts AFTER the adjustment must equal the estimated amount of Bad Debt Expense. If you make a T account starting with the beginning credit balance of 9,000 and add or subtract all the entries to it, you will end up with a credit balance of 5,000. So in order to turn that into a credit balance of 25,000 you would make the entry:
Dr Bad Debt Expense 20,000
Cr Allowance for Doubtful Accounts 20,000
Now there is a credit balance of 25,000 in Allowance for Doubtful Accounts
(e) Determine the ending balances in Accounts Receivable and Allowance for Doubtful
Accounts.
By adding and subtracting all the entries for Accounts Receivable and Allowance for Doubtful Accounts, you end up with a debit balance in Accounts Receivable of 230,000 and a credit balance in Allowance for Doubtful accounts of 25,000
(f) What is the net realizable value of the receivables at the end of the period?
230,000 - 25,000 = 205,000
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