Raintree Cosmetic Company sells its products to customers on a credit basis. An
ID: 2550512 • Letter: R
Question
Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following:
During 2018, credit sales were $1,830,000, cash collections from customers $1,910,000, and $55,000 in accounts receivable were written off. In addition, $4,600 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:
Required:
1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off.
2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:
Bad debt expense is estimated to be 2% of credit sales for the year.
Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.
3. For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?
Journal Entry Worksheet
Requirement 1.
1.Record accounts receivable written off during the year 2018.
2.Record entry to reinstate an account receivable previously written off.
3.Record collection of an account receivable previously written off.
Requirement 2
1.Bad debt expense is estimated to be 2% of credit sales for the year.
2.Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
3.Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.
Requirement 3
1.For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?
Current assets: Receivables, net of allowance for uncollectible accounts of $46,000 $ 512,000Explanation / Answer
1.Record accounts receivable written off during the year 2018. Debit Credit Allowance for uncollectible accounts 55000 Accounts receivable 55000 2.Record entry to reinstate an account receivable previously written off. Debit Credit Accounts receivable 4600 Allowance for uncollectible accounts 4600 3.Record entry to reinstate an account receivable previously written off. Debit Credit Cash 4600 Accounts receivable 4600 Requirement-2 1. Bad Debt expense 2% of credit sale Bad Debt Expense 36600 Allowance for uncollectible accounts 36600 (2% of 1830000) 2. 10% of year end balance Bad Debt Expense 46700 Allowance for uncollectible accounts 46700 (10% of 423000+4400 Working: Accounts Receivable Beginning 558000 Write off 55000 Credit Sale 1830000 Cash Sale 1910000 Closing Balance 423000 Allowance for uncollictibel accounts Write off 55000 Beginning 46000 Collection of previousl w/off 4600 Closing Balance 4400 3. 10% of year end balance-aeging Bad Debt Expense 54314 Allowance for uncollectible accounts 54314 (49914+4400) Age Group Amount % of 423000 % Uncollectible Estimated Allowance 0-60 253800 3 7614 61-90 42300 5 2115 91-120 84600 25 21150 over 120 42300 45 19035 423000 49914 Requirment-3 Accounts Receivable Less year end allowance a 423000 36600-4400=32200 390800 b 423000 42300 380700 c 423000 49914 373086
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.