The following transactions were completed by The Irvine Company during the curre
ID: 2446879 • Letter: T
Question
The following transactions were completed by The Irvine Company during the current fiscal year ended December 31:
Feb. 8
Received 40% of the $18,000 balance owed by DeCoy Co., a bankrupt business, and wrote off the remainder as uncollectible.
May 27
Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,350 cash in full payment of Seth’s account.
Aug. 13
Wrote off the $6,400 balance owed by Kat Tracks Co., which has no assets.
Oct. 31
Reinstated the account of Crawford Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,880 cash in full payment of the account.
Dec. 31
Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,190; Bonneville Co., $5,500; Crow Distributors, $9,400; Fiber Optics, $1,110.
Dec. 31
Based on an analysis of the $1,785,000 of accounts receivable, it was estimated that $35,700 will be uncollectible. Journalized the adjusting entry.
Required:
1.
Record the January 1 credit balance of $26,000 in a T account for Allowance for Doubtful Accounts.
2.
A.
Journalize the transactions. For the December 31 adjusting entry, assume the $1,785,000 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses.
B.
Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.
3.
Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
4.
Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ¼ of 1% of the net sales of $18,200,000 for the year, determine the following:
A.
Bad debt expense for the year.
B.
Balance in the allowance account after the adjustment of December 31.
C.
Expected net realizable value of the accounts receivable as of December 31.
2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,785,000 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses.
1.
Record the January 1 credit balance of $26,000 in a T account for Allowance for Doubtful Accounts.
2.
B.
Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.
Feb. 8
Received 40% of the $18,000 balance owed by DeCoy Co., a bankrupt business, and wrote off the remainder as uncollectible.
May 27
Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,350 cash in full payment of Seth’s account.
Aug. 13
Wrote off the $6,400 balance owed by Kat Tracks Co., which has no assets.
Oct. 31
Reinstated the account of Crawford Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,880 cash in full payment of the account.
Dec. 31
Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,190; Bonneville Co., $5,500; Crow Distributors, $9,400; Fiber Optics, $1,110.
Dec. 31
Based on an analysis of the $1,785,000 of accounts receivable, it was estimated that $35,700 will be uncollectible. Journalized the adjusting entry.
Explanation / Answer
Irvine Company 1 Record the January 1 Credit Balance of $ 26,000 in a T account for Allowance for Doubtful accounts Allowance for Doubtful accounts Particulars Debit Particulars Credit By Balance b/d $ 26,000 2 Journalise the Transactions Feb-08 Received 40% of the $18,000 balance owed by Decoy Co., a bankrupt business, and wrote off the remainder as uncollectible Debit Credit Cash $ 7,200 Allowance for Accounts Receivable $ 10,800 Accounts Receivable $ 18,000 May-27 Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Jurnalised the receipt of $ 7,350 cash in full payment of Seth's account Debit Credit Accounts Receivable $ 7,350 Allowance for Doubtful accounts $ 7,350 (For reinstatement of accouts receivable which had been written off) Debit Credit Cash $ 7,350 Accounts Receivable $ 7,350 (For Receipt of cash) Aug-13 Write off the $6,400 balance owed by Kat Tracks Co., which has no Assets Debit Credit Allowance for Doubtful accounts $ 6,400 Accounts Receivable $ 6,400 Oct-31 Reinstated the account of Crawford co, which had been written off in the preceding year as uncollectible. Jurnalised the receipt of $ 3,880 cash in full payment of Seth's account Debit Credit Accounts Receivable $ 3,880 Allowance for Doubtful accounts $ 3,880 (For reinstatement of accouts receivable which had been written off) Debit Credit Cash $ 3,880 Accounts Receivable $ 3,880 (For Receipt of cash) Dec-31 Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,190; Bonneville Co., $5,500; Crow Distributors, $9,400; Fiber Optics, $1,110. Debit Credit Allowance for Doubtful accounts $ 23,200 Accounts Receivable- Newbauer Co $ 7,190 Accounts Receivable - Bonneville Co $ 5,500 Accounts Receivable - Crow Distributers $ 9,400 Accounts Receivable - Fiber Optics $ 1,110 Dec-31 Based on an analysis of the $1,785,000 of accounts receivable, it was estimated that $35,700 will be uncollectible. Journalized the adjusting entry. Rquired credit balance in allowance for doubtful accounts $ 35,700 Credit balance Balance in Allowance for doubtful accounts: ($ 26,000 - $10,800 + $ 7,350 - $ 6,400 + $ 3,880 -$ 23,200 ) $ -3,170 Debit balance Adjusting entry for Bad debts $ 38,870 Debit Credit Bad Debts $ 38,870 Allowance for doubtful accounts $ 38,870 3 Determine the expected net realizable value of accounts receivable as of December 31 Accounts Receivable $ 17,85,000 Less: Allowance for doubtful accounts $ -35,700 Net Realizable value of Accounts Receivable $ 17,49,300 4 If adjusting entry for provision for uncollectible accounts is based on estimated expense 1/4 of 1% of the net sales of $ 18,200,000 instead of analysis of accounts receivable: A Bad debt expense for the year Required Balance in Allowance for Doubtful accounts ( $ 18,200,000 x 1% x 1/4) $ 45,500 Balance in Allowance for doubtful accounts: ($ 26,000 - $10,800 + $ 7,350 - $ 6,400 + $ 3,880 -$ 23,200 ) $ -3,170 Adjusting entry for Bad debts $ 48,670 Debit Credit Bad Debts $ 48,670 Allowance for doubtful accounts $ 48,670 B. Balance in Allowance account after the adjustment of December 31 $ 3,170 Debit Balance Balance in allowance account before bad debt adjusting entry Allowance for Doubtful accounts Particulars Debit Particulars Credit By Balance b/d $ 26,000 Accounts Receivable-Decoy Co $ 10,800 Accounts Receivable-Seth Nelson $ 7,350 Accounts Receivable-Kat Tracks Co $ 6,400 Accounts Receivable-Crawford $ 3,880 Accounts Receivable- Newbauer Co $ 7,190 By Balance c/f $ 3,170 Accounts Receivable - Bonneville Co $ 5,500 Accounts Receivable - Crow Distributers $ 9,400 Accounts Receivable - Fiber Optics $ 1,110 Total $ 40,400 Total $ 40,400 To Balance b/f $ 3,170 C. Expected Net realizable Value of the accounts receivables as of December 31 Accounts Receivable $ 17,85,000 Less: Allowance for doubtful accounts $ -45,500 Net Realizable value of Accounts Receivable $ 17,39,500
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