The following transactions were completed by The Irvine Company during the curre

Question

The following transactions were completed by The Irvine Company during the current fiscal year ended December 31:

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Chart of Accounts

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T Accounts

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Journal

2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,759,500 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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JOURNAL

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Feb. 8 Received 45% of the $18,700 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 $7,270 cash in full payment of Seth’s account. Aug. 13 Wrote off the $6,360 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 $3,975 cash in full payment of the account. Dec. 31 Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,265; Bonneville Co., $5,595; Crow Distributors, $9,305; Fiber Optics, $1,150. Dec. 31 Based on an analysis of the $1,759,500 of accounts receivable, it was estimated that $35,190 will be uncollectible. Journalized the adjusting entry.

Explanation / Answer

Allowance for Doubtful Accounts

3. Expected net reaizable value of accounts receivable = Accounts Receivable, gross - Allowance for Doubtful Accounts ( Ending balance) = $ ( 1,759,500 - 35,190) = $ 1,724,310

4. Provision for uncollectible accounts = $ 17,710,000 x 0.25% = $ 44,275

A. Bad debt expense : $ 47,305

B.Balance in allowance account : $ 44,275

C. Expected net realizable value of accounts receivable: $ ( 1,759,500 - 44,275) = $ 1,715,225

Date Account Titles Debit Credit $ $ Feb 8 Cash 8,415 Allowance for Doubtful Accounts 10,285 Accounts Receivable - DeCoy Co. 18,700 May 27 Accounts receivable-Seth Nelson 7,270 Allowance for Doubtful Accounts 7,270 Cash 7,270 Accounts Receivable- Seth Nelson 7,270 Aug 13 Allowance for Doubtful Accounts 6,360 Accounts Receivable - Kat Tracks Co. 6,360 Oct 31 Accounts receivable - Crawford Co. 3,975 Allowance for Doubtful Accounts 3,975 Cash 3,975 Accounts receivable- Crawford Co. 3,975 Dec 31 Allwance for Doubtful Accounts 23,315 Accounts Receivable- Newbauer Co. 7,265 Accounts Receivable- Bonnville Co. 5,595 Accounts Receivable- Crow Distributors 9,305 Accounts Receivable- Fibre Optics 1,150 Dec 31 Bad debt expense* 38,220 Allowance for Doubtful Accounts 38,220

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