The following transactions were completed by Daws Company during the current fis
ID: 2579913 • Letter: T
Question
The following transactions were completed by Daws Company during the current fiscal year ended December 31:
Instructions
Record the January 1 credit balance of $54,200 in a T account for Allowance for Doubtful Accounts.
Journalize the transactions. Post each entry that affects the following selected T accounts and determine the new balances:
Determine the expected net realizable value of the accounts receivable as of December 31.
Check Figure: $1,390,000
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 $13,200,000 for the year, determine the following:
Bad debt expense for the year.
Balance in the allowance account after the adjustment of December 31.
Expected net realizable value of the accounts receivable as of December 31.
Jan. 29. Received 35% of the $9,000 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible. Apr. 18. Reinstated the account of Spencer Clark, which had been written off in the preceding year as uncollectible. Journalized the receipt of $4,000 cash in full payment of Clark's account. Aug. 9. Wrote off the $11,850 balance owed by Iron Horse Co., which has no assets. Nov. 7. Reinstated the account of Vinyl Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,000 cash in full payment of the account. Dec. 31. Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $12,100; DeVine Co., $8,110; Moser Distributors, $21,950; Oceanic Optics, $10,000. 31. Based on an analysis of the $1,450,000 of accounts receivable, it was estimated that $60,000 will be uncollectible. Journalized the adjusting entry.Explanation / Answer
Jan 29
Dr Cash 3,150
Dr Allowance for Doubtful Accounts 5,850
Cr Accounts Receivable 9,000
Apr 18
Dr Accounts Receivable 4,000
Cr Allowance for Doubtful Accounts 4,000
Aug 9
Dr Allowance for Doubtful Accounts 11,850
Cr Accounts Receivable 11,850
Nov 7
Dr Accounts Receivable 7,000
Cr Allowance for Doubtful Accounts 7,000
Dec 31
Dr Allowance for Doubtful Accounts 52,160
Cr Accounts Receivable, Beth Connelly Inc., $12,100
Cr Accounts Receivable, DeVine Co., $8,110
Cr Accounts Receivable, Moser Distributors, $21,950
Cr Accounts Receivable, Oceanic Optics, $10,000
Dec 31
54,200 + 4,000 - 11,850 - 5,850 + 7,000 - 52,160 = 4,660 (credit) Allowance account balance before adjusting entry.
60,000 - 4,660 = 55,340 (adjustment)
Dr Bad Debt Expense 55,340
Cr Allowance for Doubtful Accounts 55,340
Net Realizable Value : $1,450,000 - $ 60,000 = $ 1,390,000
Bad debt expense for the year :
(13,200,000 x 1%) / 2 = $66,000
Balance in the allowance account after the adjustment of December 31 :
4,660 + 66,000 = $70,660
Expected net realizable value of the accounts receivable as of December 31 :
1,450,000 - 70,660 = $1,379,340
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