340 Sor 3. On July 31.2016, Hovak conctudes thati ible and that the account shou

Question

340 Sor 3. On July 31.2016, Hovak conctudes thati ible and that the account should be written income? Explain. , have n Hovak's2016 net Sherman Co, began operation 2015 that involved sales on sredit. acconts veceivable coliecons, ai bd debts. hese traniicts are summarized as follows 2014 Janusry 1, 2014, nsactiondating 2014 and transactions and bad debts adjustments a. Sold S685.350 of merchandise (that had cost $50000 on credit, termm n/30, b. Received $482,300 cash in payment of accounts recersable c. Wrote off $9.350 of uncollectible accounts receivable d. In adjusting the accounts on December 3, the company estimated that 1% of account Check id) Dr Bad Debts tecemfle be uncollectible. 2015 e. Sold $870.220 of merchandise (that had cost $650.000) on credit, terms n/30. f. Received $990.800 cash in payment of accounts receivable. 9 Wrote off S11,090 of uncollectible accounts receivable. ini Dr. Bad Debts h. In adjusting the accounts on December 31 , the company estimated that 1% ot accounts receivable wm Expense $9,773 be uncollectible. Re Prepare journal entries to record Sherman's 2014 and 2015 summarized transactions and its year-end applies the allowance method for its accounts receivable. Round amounts to the nearest dollar.) The following selected transactions are from Springer Company 2014 Nov. adjusting entry to record bad debts expense. (The company uses the perpetual inventory system and it Problem 7-5B Analyzing and journalizing notes receivable transactions C2 C3 P3 Accepted a S4 800, 90-day, 8% note dated this day in granting Steve Julian a time exten sanon his past-due account receivable. Made an adjusting entry to record the accrued interest on the Julian note. 1 Dec. 31 2015 Received Julian's payment for principal and interest on the note dated November 1 Accepted a $12.600. 30-day, 8% note dated this day in granting a time extension on the past. due account receivable from King Co. Accepted a $6.200. 60-day, 12% note dated this day in granting Myron Shelley atin eenn sion on his past-due account receivable. The King Co. dishonored its note when presented for payment. Received payment of principal plus interest from M. Shelley for the March I note Accepted a $2,000, 72-day, 8% note dated this day in granting a time extension on the past-due account receivable of Ryder Solon. Accepted a $9,500, 90-day, 8% note dated this day in granting! Felton a time extension on his past-due account receivable Check Jan. 30, Cr. Interest Revenue $32 Jan. 30 Feb. 28 Mar. 1 Apr. June 30 30 15 April 30, Cr Interest Revenue $124 21 Aug. 26 Received payment of principal plus interest from R. Solon for the note of June 15 Sep. 19 Received payment of principal plus interest from J. Felton for the June 21 note. Nov. 30 Wrote off King's account against Allowance for Doubtful Accounts Sep. 19. Cr nterest Revenue $190 mounts to the nearest dollar.) 1. Prepare journal entries to record these transactions and events. Round a Analysis Component 2. Wh Required still outstanding at the end of the period? Explain the reason for this principle being satisfied. at re porting is necessary when a business pledges receivables as security for a loan and the loan is e reason for this requirement and thea

Explanation / Answer

Problem 7-4B – Sherman Co

Solution:

Journal Entry and adjustment entry for year 2014

Event

General Journal

Debit

Credit

2014

(a)

Accounts Receivable

$685,350

Sales Revenue

$685,350

Cost of Goods Sold

$500,000

Inventory

$500,000

(b)

Cash

$482,300

Accounts Receivable

$482,300

c)

Allowance for Uncollectible Account

$9,350

    Accounts Receivable

$9,350

(d) Refer Note 1

Bad Debt Expense

$11,287

   Allowance for Uncollectible Account

$11,287

Note 1 --- Calculation of Estimated Uncollectible Amount of Accounts Receivable for Year 2014 and 2015

First of all we need to calculate the ending balance of accounts receivable for both the year

$$

On Accounts Sales during the year

$685,350

Less: Cash Received during 2014

$482,300

Less: Wrote off during the year

$9,350

Ending Balance of Accounts Receivable 2014

$193,700

Plus: On Account Sales during year 2015

$870,220

Less: Cash Received during 2015

$990,800

Less: Wrote off during 2015

$11,090

Ending Balance of Accounts Receivable 2015

$62,030

2014

Ending Balance of Accounts Receivable 2014 = $193,700

Estimated Uncollectible Amount = Ending Accounts Receivable $193,700 * 1% = $1,937

Since Allowance for Uncollectible Account has already Debit balance (from wrote off account in 2014) $9,350

We are required to make this balance to $1,937 Credit and adjust the amount accordingly. So we need to Credit The Allowance for Uncollectible Account with $11,287 (1937 + 9,350) and Debit the Bad Debt Expense by $11,287

2015

Ending Balance of Accounts Receivable 2015 = $62,030

Estimated Uncollectible Amount = Ending Accounts Receivable $62,030 * 1% = $620.30

Allowance for Uncollectible Account ending balance before adjustment entry in year 2015

Beginning balance 2015 (ending balance of 2014)

$1,937

Less: Wrote off during 2015

(11,090)

Ending balance before adjustment

$9,153 Debit

Since Allowance for Uncollectible Account has Debit balance of $9,153 before adjustment.

We are required to make this balance to $620.30 which is the estimated uncollectible amount for year 2015. So we need to Credit The Allowance for Uncollectible Account with $9,773 (620.3 + 9153) and Debit the Bad Debt Expense by $9,773.

Journal Entry for 2015 with adjustment entry

Event

General Journal

Debit

Credit

2015

(e)

Accounts Receivable

$870,220

Sales Revenue

$870,220

Cost of Goods Sold

$650,000

Inventory

$650,000

(f)

Cash

$990,800

Accounts Receivable

$990,800

(g)

Allowance for Uncollectible Account

$11,090

    Accounts Receivable

$11,090

(h) Refer Note 1

Bad Debt Expense

$9,773

   Allowance for Uncollectible Account

$9,773

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Pls ask separate question for remaining parts.

Event

General Journal

Debit

Credit

2014

(a)

Accounts Receivable

$685,350

Sales Revenue

$685,350

Cost of Goods Sold

$500,000

Inventory

$500,000

(b)

Cash

$482,300

Accounts Receivable

$482,300

c)

Allowance for Uncollectible Account

$9,350

    Accounts Receivable

$9,350

(d) Refer Note 1

Bad Debt Expense

$11,287

   Allowance for Uncollectible Account

$11,287

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