Homework: HW08.01 Save Score: 0 of 7 pts 18 of 18 (10 complete) HW Score: 28.26%
ID: 2551783 • Letter: H
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Homework: HW08.01 Save Score: 0 of 7 pts 18 of 18 (10 complete) HW Score: 28.26%, 14.13 of 50 pts P8-27A (similar to Question Help On August 31, 2016, Rosebud Floral Supply had a $180,000 debit balance in Accounts Receivable and a $7,200 credit balance in Allowance for Bad Debts. During September, Rosebud made Sales on account, $520,000. Ignore Cost of Goods Sold - Collections on account, $582.000 Write-offs of uncollectible receivables, $4,000 Read the requirements Requirement 1. Joumalze all September entries usng the allowance method Bad Debts Expense was estimated at 2% of credit sales. Show all September activity in Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts). (Record debits first, then credits. Select the explanation on the last line of the journal entry table.) Begin by journalizing all September entries using the allowance method Sales on account, $520,000. lgnore Cost of Goods Sold Date Accounts and Explanation Debit Credit Sep 30 Requirements 1. Journalize all September entries using the allowance method. Bad debts expense was estimated at 2% of credit sales Show all September activity n, Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts) 2. Using the same facts, assume that Rosebud used the direct write-aff method to account for uncollectible receivables Journalize all September entries using the direct wnite-off method Post to Accounts Receivable and Bad Debts Expense, and show their balances at September 30, 2016 What amount of Bad Debts Expense would Rosebud report on its September income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason 3. 4. What amount of net accounts receivable would Rosebud report on its September 30, 2016, balance sheet under each of the two methods? Which amount is more realistic? Give your reason Print DoneExplanation / Answer
Requirement 1.
Sep.3o Accounts receivable A/C Dr. $5,20,000
To sales revenue A/C. $5,20,000
(Record sales for the month)
Collection on account $5,82,000
Sep. 30 Cash A/C Dr. $5,82,000
To accounts receivable A/C. $5,82,000
(Collected cash on account)
Write- offs of uncollectible receivable, $4000
Sep.30 Allowance for bad debts A/C Dr. $4000
To Accounts Receivable A/C. $4000
(Wrote off uncollectible accounts)
Sep.30 Bad debts expense A/C Dr. $10,400
To allowance for bad debts A/C. $10,400
(2% of $5,20,000=$10,400)
ACCOUNT RECEIVABLE
8/31 Bal 1,80,000 5,82,000 collected
Revenue 5,20,000 4000 wrote off
9/30 Bal 1,14,000
ALLOWANCE FOR BAD DEBTS
Wrote off 4,000 7,200 8/31 Bal
10,400 expense
13,600 9/30 Bal
BAD DEBTS EXPENSE
Expense 10,400
Bal 10,400
REQUIREMENT 2.
Sep.3o Accounts receivable A/C Dr. $5,20,000
To sales revenue A/C. $5,20,000
(Record sales for the month)
Sep. 30 Cash A/C Dr. $5,82,000
To accounts receivable A/C. $5,82,000
(Collected cash on account)
Sep.30 Bad debts expense A/C Dr. $4,000
To account receivable A/C . $4,000
ACCOUNT RECEIVABLE
8/31 Bal 1,80,000 5,82,000 collected
Revenue 5,20,000 4000 wrote off
9/30 Bal 1,14,000
BAD DEBTS EXPENSE
Expense 4000
Bal 4000
REQUIREMENT 3.
INCOME STATEMENT ALLOWANCE DIRECT WRITE
METHOD OFF METHOD
Bad debt expense $10400 $4000
Bad debts expense under the allowance method better matches expense with revenue because the expense is recorded in the same period the sales are made.
REQUIREMENT 4.
Balance sheet Allowance Method direct write
Off method
Account receivable $ 1,14,000 1,14,000
Less . Allowance
For bad debt (13,600)
Account receivable, $ 1,00,400
net
Net account receivable under the allowance method is more realistic because it shows the amount of the receivable that the company expects to collect.
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