The following transactions were completed by The Irvine Company during the curre
ID: 2485205 • 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.
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Set up T accounts.
Journal
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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.
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PAGE 10
JOURNAL
Score: 234/249
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Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.
In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.
The amount of bad debt expense is affected by the balance in the allowance account.
Final Questions
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3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$
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Remember that net realizable value is the amount that is expected to be collected or realized.
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. $
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B. Balance in the allowance account after the adjustment of December 31. $
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C. Expected net realizable value of the accounts receivable as of December 31. $
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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.Explanation / Answer
1. & 2B.
2A.
3. Expected net realizable value of accounts receivable as of December 31: $1,752,470
4A. Bad debt expense for the year: $45,500
(1/4 x 1% x $18,200,000)
4B. Balance in the allowance account after the adjustment of December 31: $42,330
4C. Expected net realizable value of accounts receivable as of December 31: $1,742,670
Allowance for Doubtful Accounts Date Debit Date Credit Feb-08 10800 Jan-01 Balance 26000 Aug-13 6400 May-27 7350 Dec-31 23200 Oct-31 3880 Dec-31 Adjusting Entry 35700 Dec-31 Unadjusted Balance 3170 Dec-31 Adjusted Balance 32530 Bad Debt Expense Date Debit Date Credit Dec-31 Adjusting Entry 35700Related Questions
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