Allowance method entries The following transactions were completed by Wild Trout

Question

Allowance method entries

The following transactions were completed by Wild Trout Gallery during the current fiscal year ended December 31:

Required:

1. Record the January 1 credit balance of $46,600 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.

2. a. Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,124,700 balance in accounts receivable reflects the adjustments made during the year.

2. b. Post each entry that affects the following T accounts and determine the new balances:

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 ½ of 1% of the sales of $6,940,000 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 (after all of the adjustments and the adjusting entry).
$

Jan. 19. Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalize the receipt of $2,220 cash in full payment of Arlene’s account. Apr. 3. Wrote off the $12,720 balance owed by Premier GS Co., which is bankrupt. July 16. Received 25% of the $22,800 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible. Nov. 23. Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,620 cash in full payment. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $9,570 ; Fogle Co., $2,840 ; Lake Furniture, $ 7,305 ; Melinda Shryer, $2,065. Dec. 31. Based on an analysis of the $1,124,700 of accounts receivable, it was estimated that $48,900 will be uncollectible. Journalize the adjusting entry.

Explanation / Answer

part 1 jounral entries date accounts debit credit Jan-19 Accounts Receivable—Arlene Gurley 2220 Allowance for Doubtful Accounts 2220 Cash 2220 Accounts Receivable—Arlene Gurley 2220 Apr-03 Allowance for Doubtful Accounts 12720 Accounts Receivable—Premier GS Co. 12720 Jul-16 Cash 5700 (22800*25%) = 5700 Allowance for Doubtful Accounts 17100 Accounts Receivable—Hayden Co. 22800 Nov-23 Accounts Receivable—Harry Carr 3620 Allowance for Doubtful Accounts 3620 Nov-23 Cash 3620 Accounts Receivable—Harry Carr 3620 Dec-31 Allowance for Doubtful Accounts 21780 Accounts Receivable—Cavey Co. 9570 Accounts Receivable—Fogle Co. 2840 Accounts Receivable—Lake Furniture 7305 Accounts Receivable—Melinda Shryer 2065 Bad Debt Expense 49740 Allowance for Doubtful Accounts 49740 Part 2 Ledger Allowance for Doubtful Accounts Apr-03 12720 Jan-01 balance 46600 Jul-16 17100 Jan-19 2220 Dec-31 21780 Nov-23 3620 Dec-31 Unadjusted Balance 840 Dec-31 Adjusting Entry 49740 Dec-31 Adjusted Balance 48900 bad debt expense Dec-31 Adjusting Entry 49740 Part 3 expected net realizable value of the accounts receivable as of December 31 = 1124700-49740 = 1074960 PART 4 Bad debt expense for the year = 6940000*0.5% = 34700 Balance in the allowance account after the adjustment of December 31 = 34700-840 = 33860 Expected net realizable value of the accounts receivable as of December 31 = 1124700-33860 = 1090840

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