You are the Accountant for WanneBee Corporation WannaBee Corporation has $1,500,
ID: 2426458 • Letter: Y
Question
You are the Accountant for WanneBee Corporation
WannaBee Corporation has $1,500,000 of Receivables on December 31, 2000. WannaBee uses the Allowance Method and historical data indicates that 7% of receivables become uncollectible. The end of year balance in the ADA is 0.
The following are the 2000 end of year receivables.
AR- Goodboy $25,000 AR-NannyNancy $250,000
AR-BusyBody $75,000 AR-AlphaBetCo $130,000
AR-DippyDo $55,000 AR-TipsyTurvy $98,000
AR-MerryMen $145,000 AR-HappyHart $289,000
AR-CurlyCues $211,000 AR-MityMan $47,000
AR-PrettyPenny $109,000 AR-JumpingJax $66,000
During 2001 the following events occurred:
Goodboy defaulted.
BusyBody declared bankruptcy but paid $19,000.
DippyDo paid the account in full.
MerryMen still owes $48,000.
CurlyCues has not answered the phone for 8 months.
PrettyPenny paid its account.
NannyNancy paid $150,000 and on November 21 made a 120 note at 4% APR for the remainder.
AlphaBetCo paid its account in full.
TipsyTurvy has closed its business.
HappyHart paid its bill.
MityMan still owes its account.
JumpingJax paid ½ its bill and will not pay the rest.
The Receivables balance at the end of the year is $2,235,000
1. Prepare the Required AJE for December 31, 2000.
2. Prepare the Required AJE for December 31, 2001.
(AJE stands for Adjusted Journal Entry)
Explanation / Answer
Required Adjusting Journal Entry for December 31, 2000
Date Particulars LF Debit Credit
Dec, 31, 2000 Bad Debts Expense A/c Dr $105,000
To allowance for bad debts A/c $105,000
(Being allowance made for bad debts)
( $1,500,000 * 7 /100 = $105,000)
Journal entries for the accounts to be written off for 2001
Date Particulars LF Debit Credit
Dec/31/00 Good boy defaulted is considerd as loss it comes under contigent liabity
no journal entry required
mm/dd/yy Cash A/c Dr $19,000
To BusyBody Accounts Receivable $19,000
(Being Cash received one /fifth portion
from busy body has received)
mm/dd/yy Bad Debts Expense A/c Dr $56,000
To BusyBody Accounts Receivable A/c $56,000
(Being uncollected amount has recorded)
mm/dd/yy Cash A/c dr $55,000
To DippyDo Accounts Receivable A/c $55,000
(Being cash received in full from DippyDo)
mm/dd/yy Bad Debts Expense A/c Dr $48,000
To MerryMen Accounts Receivable A/c $48,000
(Being uncollected amount has recorded)
mm/dd/yy Bad Debts Expense A/c Dr $211,000
To CurlyCues Accounts Receivable A/c $211,000
(Being uncollected amount has recorded)
mm/ddd/yy Cash A/c dr $109,000
To PrettyPenny Accounts Receivable A/c $109,000
(Being cash collected from pretty has recorded)
mm/dd/yy Cash A/c dr $150,000
To NannyNancy Accounts Receivable A/c $150,000
(Being cash collected from Nancy has recorded)
mm/dd/yy Cash A/c dr $130,000
To AlphaBetCo Accounts Receivable A/c $130,000
(Being cash collected from AlphaBetCo has recorded)
mm/dd/yy Bad Debts Expense A/c Dr $98,000
To TipsyTurvy Accounts Receivable A/c $98,000
(Being uncollected amount has recorded)
mm/dd/yy Cash A/c dr $289,000
To Happy Hart Accounts Receivable A/c $289,000
(Being cash collected from Happy Hart has recorded)
mm/dd/yy Bad Debts Expense A/c Dr $47,000
To MityMan Accounts Receivable A/c $47,000
( (Being uncollected amount from MityMan has recorded)
mm/dd/yy Cash A/c dr $33,000
To JumpingJax Accounts Receivable A/c $33,000
(Being cash collected $ 66,000 / 2 = $33,000 from
JumpingJax has recorded)
dd/mm/yy Bad Debts Expense A/c Dr $33,000
To JumpingJax Accounts Receivable A/c $33,000
(Being uncollected cash $ 66,000 / 2 = $33,000 from
JumpingJax has recorded)
Required Adjusting Journal Entry for December 31, 2001.
Dec 31,2001 Bad Debts Expense A/c Dr $156,450
To allowance for bad debts A/c $156,450
(Being allowance made for bad debts)
$2,235,000 *7 /100 =$156,450
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