Can anyone help me with this problem please? The following information pertains
ID: 2452964 • Letter: C
Question
Can anyone help me with this problem please?
The following information pertains to Jooners on 12/31/10
Sales during year 800,000 cash
1,400,000 credit
2,200,000 Total
Accts Receivable 12/31 860,000
Allowance for Doubtful Accounts 7,000 credit balance
Outstanding Accounts
Not due 688,000
1-30 past 86,000
31-60 past 51,600
61-90 past 25,800
Over 90 8,600
% Uncollectible
Not due 2%
1-30 past 5%
31-60 past 9%
61-90 past 15%
Over 90 25%
Prepare the following entries
Adjusting entry on 12/31 after doing an aging of accounts receivable assuming the company uses the percentage of receivables approach for bad debt expense
Provide the entry to record bad debt of $1200 from Smith Company that has gone bankrupt on 1/30
Assume the company uses % of credit sales and
determines that 2% of credit sales are uncollectible
prepare the adjusting entry
Explanation / Answer
Answer:
Given Information
Cash Sales
800,000
Credit Sales
1,400,000
Total Sales
2,200,000
Accounts Receivable 12/31 = 860,000
Allowance for Doubtful Accounts (Credit balance) = 7,000
Calculation of Uncollectible Amount
Outstanding Accounts
Amount
% Uncollectible
Uncollectible Amount
Not due
688,000
2%
13,760
1-30 past
86,000
5%
4,300
31-60 past
51,600
9%
4,644
61-90 past
25,800
15%
3,870
Over 90
8,600
25%
2,150
Total
28,724
A. Adjusting entry on 12/31 after doing an aging of accounts receivable assuming the company uses the percentage of receivables approach for bad debt expense
Since, as on 31/12 Allowance for doubtful accounts (credit balance) 7,000
Adjustment entry is to be passed as follows:
Allowance for Doubtful Account Dr. 7,000
Bad Debts Expenses Dr. 21,724
To Accounts Receivable 28,724
(Being Bad Debts adjustment entry passed)
Explanation: Allowance for Doubtful Account is showing credit balance as on 31/12 of 7,000 and at year end this account is transferred to Accounts Receivable. The estimation of management related to bad debt for the year is 28,724. Net amount 21,724 should be transferred to Profit & Loss Account to record as Bad Debts Expenses for the year and Allowance for Doubtful Account is to be closed by transferring the amount 7,000 to Accounts Receivable and resulting it reduced the value of receivable.
B. Provide the entry to record bad debt of $1200 from Smith Company that has gone bankrupt on 1/30
Allowance for Doubtful Account Dr. $1,200
To Accounts Receivable $1,200
(Being Smith Company has gone bankrupt and dab debts is adjusted from Accounts Receivable)
Explanation: By taking this case as an independent situation, when Smith Company has gone bankrupt, Allowance for Doubtful Account will be reduced by $1,200 and this amount is also reduced in Accounts Receivable.
C. Assume the company uses % of credit sales and determines that 2% of credit sales are uncollectible prepare the adjusting entry
Uncollectible Amount = 2% of Credit Sales = 2% x 1,400,000 = $28,000
Adjustment Entry:
Allowance for Doubtful Account Dr. 7,000
Bad Debts Expenses Dr. 21,000
To Accounts Receivable 28,000
(Being bad debt adjustment entry passed)
Cash Sales
800,000
Credit Sales
1,400,000
Total Sales
2,200,000
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