Problem-Solving Strategy Entries Related to Uncollectible Accounts The following

Question

Problem-Solving Strategy Entries Related to Uncollectible Accounts The following transactions were completed by The Spencer Gallery during the current fiscal year ended December 31: Mar. 15. Reinstated the account of Brad Atwell, which had been written off in the preceding year as uncollectible. Journalized the receipt of $2,020 cash in full payment of Brad’s account. May 20. Wrote off the $11,570 balance owed by Glory Rigging Co., which is bankrupt. Aug. 13. Received 30% of the $20,800 balance owed by Coastal Co., a bankrupt business, and wrote off the remainder as uncollectible. Sept. 2. Reinstated the account of Lorie Kidd, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,295 cash in full payment. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Kimbro Co., $8,705; McHale Co., $2,585; Summit Furniture, $6,645; Wes Riggs, $1,880. Dec. 31. Based on an analysis of the $1,023,500 of accounts receivable, it was estimated that $44,500 will be uncollectible. Journalized the adjusting entry. Required: 1. Record the January 1 credit balance of $42,400 in a T account (below) for Allowance for Doubtful Accounts. Hide Hint(s) 2. a.Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,023,500 balance in accounts receivable reflects the adjustments made during the year. Mar. 15-reinstate Accounts Receivable-Brad Atwell Bad Debt Expense Mar. 15-collection Cash Bad Debt Expense May 20 Accounts Receivable-Glory Rigging Co. Bad Debt Expense Aug. 13 Sept. 2-reinstate Sept. 2-collection Dec. 31-write-off Dec. 31-adjusting 2. b. Post each entry that affects the following T accounts and determine the new balances: Allowance for Doubtful Accounts Jan. 1 Balance Dec. 31 Adjusted Balance 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 ½ of 1% of the net sales of $6,320,000 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 (after all of the adjustments and the adjusting entry). $

Explanation / Answer

Mar. 15. Reinstated the account of Brad Atwell, which had been written off in the preceding year as uncollectible. Journalized the receipt of $2,020 cash in full payment of Brad’s account 15-Mar Accounts Receivables- Brad Atwell 2020 Allowance for Doubtful Accounts 2020 Cash 2020 Accounts Receivables- Brad Atwell 2020 May 20. Wrote off the $11,570 balance owed by Glory Rigging Co., which is bankrupt 20-May Allowance for Doubtful Accounts 11570 Accounts Receivables-Glory Rigging Co. 11570 Aug. 13. Received 30% of the $20,800 balance owed by Coastal Co., a bankrupt business, and wrote off the remainder as uncollectible 13-Aug Cash 6240 Allowance for Doubtful Accounts 14560 Accounts Receivables-Coastal Co. 20800 Sept. 2. Reinstated the account of Lorie Kidd, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,295 cash in full payment 02-Sep Accounts Receivables-Lorie Kidd 3295 Allowance for Doubtful Accounts 3295 Cash 3295 Accounts Receivables- Lorie Kidd 3295 Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Kimbro Co., $8,705; McHale Co., $2,585; Summit Furniture, $6,645; Wes Riggs, $1,880. 31-Dec Allowance for Doubtful Accounts 19815 Accounts Receivables-Kimbro Co. 8705 Accounts Receivables-McHale Co. 2585 Accounts Receivables-Summit Furniture 6645 Accounts Receivables-Weg Riggs 1880 Dec. 31. Based on an analysis of the $1,023,500 of accounts receivable, it was estimated that $44,500 will be uncollectible. 31-Dec Bad Debt Expense for the Year 44500 Allowance for Doubtful Accounts 44500 2nd Part Bad Debts for the year Based on Sales ½ of 1% of the net sales of $6,320,000 31-Dec Bad Debt Expense for the Year 31600 Allowance for Doubtful Accounts 31600 Allowance for Doubtful Accounts Debit Credit Balance 01-Jan Opening Balance 42400 42400 15-Mar Cash- Brad Atwell 2020 40380 20-May Acc.Rec.-Glory Rigging 11570 28810 13-Aug Acc.Rec.-Coastal Co. 14560 14250 02-Sep Acc.Rec.-Lorie Kidd 3295 17545 31-Dec Accounts Receivables-Kimbro Co. 8705 8840 Accounts Receivables-McHale Co. 2585 6255 Accounts Receivables-Summit Furn. 6645 -390 Accounts Receivables-Weg Riggs 1880 -2270 31-Dec Bad debt exp for the year 44500 42230 Accounts Receivables Debit Credit Balance 01-Jan Opening Balance 1023500 1023500 15-Mar All.For D/DRestoration- Brad Atwell 2020 1025520 Cash 2020 1023500 20-May All.For D/D- Glory Rigging 11570 1011930 13-Aug Cash 6240 1005690 Allowance for Doubtful Accounts 14560 991130 02-Sep All.For D/DRestoration- Lorie Kid 3295 994425 Cash 3295 991130 31-Dec All.for D/D-Kimbro Co. 8705 982425 All.for D/D-McHale Co. 2585 979840 All.for D/D-Summit Furn. 6645 973195 All.for D/D-Weg Riggs 1880 971315 31-Dec Bad Debt Expense for the Year 44500 Net Realisable value of Accounts Receivables as on 31 Dec 971315-42230= 929085 2nd Part Bad Debts for the year Based on Sales ½ of 1% of the net sales of $6,320,000 Allowance for Doubtful Accounts Debit Credit Balance 01-Jan Opening Balance 42400 42400 15-Mar Cash- Brad Atwell 2020 40380 20-May Acc.Rec.-Glory Rigging 11570 28810 13-Aug Acc.Rec.-Coastal Co. 14560 14250 02-Sep Acc.Rec.-Lorie Kidd 3295 17545 31-Dec Accounts Receivables-Kimbro Co. 8705 8840 Accounts Receivables-McHale Co. 2585 6255 Accounts Receivables-Summit Furn. 6645 -390 Accounts Receivables-Weg Riggs 1880 -2270 31-Dec Bad debt exp for the year 31600 29330 Allowance for Doubtful Accounts Debit Credit Balance 01-Jan Opening Balance 42400 42400 15-Mar Cash- Brad Atwell 2020 40380 20-May Acc.Rec.-Glory Rigging 11570 28810 13-Aug Acc.Rec.-Coastal Co. 14560 14250 02-Sep Acc.Rec.-Lorie Kidd 3295 17545 31-Dec Accounts Receivables-Kimbro Co. 8705 8840 Accounts Receivables-McHale Co. 2585 6255 Accounts Receivables-Summit Furn. 6645 -390 Accounts Receivables-Weg Riggs 1880 -2270 31-Dec Bad debt exp for the year 31600 29330 Accounts Receivables - Same 971315 Bad debt exp for the year 31600 Net Realisable value of Accounts Receivables as on 31 Dec 971315-29330= 941985

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