he following transactions were completed by The Irvine Company during the curren
ID: 2482961 • Letter: H
Question
he following transactions were completed by The Irvine Company during the current fiscal year ended December 31: Feb. 8 Received 30% of the $18,900 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 $7,265 cash in full payment of Seth’s account. Aug. 13 Wrote off the $6,410 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 $3,980 cash in full payment of the account. Dec. 31 Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,090; Bonneville Co., $5,485; Crow Distributors, $9,415; Fiber Optics, $1,190. Dec. 31 Based on an analysis of the $1,774,000 of accounts receivable, it was estimated that $35,480 will be uncollectible. Journalized the adjusting entry. Required: 1. Record the January 1 credit balance of $25,795 in a T account for Allowance for Doubtful Accounts. 2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,774,000 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 $18,660,000 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.
1. Determine the amount of the amortization, depletion, or impairment for the current year for each of the items in the Instructions.
Explanation / Answer
1.
Allowance for doubtful accounts
Date
Debit
Date
Credit
-
January 1
Opening balance
$25,795
Total
-
Total
$25,795
2.
A.
February 8
Cash
$5,670
Allowance for doubtful accounts
$13,230
Account receivable
$18,900
May 27
Account receivable
$7,265
Allowance for doubtful accounts
$7,265
Cash
$7,265
Account receivable
$7,265
August 13
Allowance for doubtful accounts
$6,410
Account receivable
$6,410
October 13
Account receivable
$3,980
Allowance for doubtful accounts
$3,980
Cash
$3,980
Account receivable
$3,980
December 31
Allowance for doubtful accounts
$23,180
Account receivable
$23,180
December 31
Bad debt expense
$49,220
Allowance for doubtful accounts
$49,220
B.
Allowance for doubtful accounts
Date
Debit
Date
Credit
February 8
$13,230
January 1
Opening balance
$25,795
August 13
$6,410
May 27
$7,265
October 3
$3,980
December 31
$49,220
December 31
$23,180
Total
$46,800
Total
$82,280
Ending balance
$35,480
Bad debt expense
Date
Debit
Date
Credit
December 31
$49,220
3.
Net realisable value = Account receivable – Allowance for doubtful accounts = $1,774,000 - $35480 = $1,738,520
4.
A. Bad debt expense = $18,660,000 * 0.01 * ¼ = $46,650
B. Balance in allowance account = $35,480 - $49,220 + $46,650 = $32,910
C. Expected net realisable value = $1,774,000 - $32,910 = $1,741,090
Allowance for doubtful accounts
Date
Debit
Date
Credit
-
January 1
Opening balance
$25,795
Total
-
Total
$25,795
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.