Raintree Cosmetic Company sells its products to customers on a credit basis. An

Question

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only t December 31, the company's fiscal year-end. The 2017 balance sheet disclosed the following: Current assets Receivables, net of allowance for uncollectible accounts of $33,000 $ 447,000 uring 2018, credit sales were $1,765,000, cash collections from customers $1,845,000, and $38,000 in accounts receivable were vritten off In addition, $3,300 was collected from a customer whose account was written off in 2017. An aging of accounts receivable t December 31, 2018, reveals the following: Percentage of Year-End Receivables in Group 70 20 Percent Uncollectible Age Group 0-60 days 61-90 days 91-120 days Over 120 days St 15 20 40 Required: . Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: . Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is c. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is Bad debt expense is estimated to be 4% of credit sales for the year. estimated to be 10% of the year-end balance in accounts receivable. determined by an aging of accounts receivable. a. For situations (ol-(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

Explanation / Answer

1) Journal entries Accouting titles & Explanations Debit Credit Allowance for uncollectible accounts 38,000 Account receivable 38,000 Account receivbale 5,000 allowance for uncollectible accouts 5,000 cash a 3,300 Account receivable 3,300 2) Journal entries Accouting titles & Explanations Debit Credit a) Bad debts expense 70600 Allowance for uncollectible accounts 70,600 (1,765,000*4%) b) Bad debts expense 40200 Allowance for uncollectible accounts 40,200 (362000*10%+4000) T-account Account receivable Allowance for uncollectible openint 480000 Cash 1,845,000 written off 38,000 opening 33,000 Sales 1,765,000 writtehn off 38,000 reinstated 3,300 restated 3,300 collected 3,300 bal 1,700 End bal 362,000 c) Bad debts expense 38390 Allowance for uncollectible accounts 38,390 (34390+4000) Age grouo % 0--60 253400 5% 12670 61--90 72400 15% 10860 91----120 18100 20% 3620 over 120 18100 40% 7240 34390 3) net account receivable reported a 428600 b 325800 c 327610

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