5. For a business that makes advance provision for uncollectible receivables (a)

Question

5. For a business that makes advance provision for uncollectible receivables (a) Journalize the entries to record the following: Record the adjusting entry at December 31, the end of the fiscal year, to provide for doubtful accounts. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates doubtful accounts of $20,000. In March of the following fiscal year, the $550 owed by Flake Co. on account is written off as uncollectible. Eight months later, $200 of the Flake Co. account is reinstated and payment of that amount is received In October, $400 is received on the $600 owed by Doe Co. and the remainder is written off as uncollectible. (1) (2) (3) (4) (b) Based on the data in (a) (1) above, what is the net realizable value of the accounts receivable as reported on the balance sheet as of December 31? (c) Assuming that the business had been following the direct write-off procedure in accounting for uncollectible receivables, journalize the entries to record the following: Recorded the write-off of account of Flake Co. [(a) (2) above]. Reinstated account of Flake Co. for $200 and recorded payment of that amount received [(a) (3) above]. Recorded the receipt of $400 from Doe Co. in (a) (4) above and wrote off the remainder owed as uncollectible. (1) (2) (3) Calculate the following: (a) (b) 6. If the interest on a note is $500, the interest rate is 6% and the time is 60 days, what is the principal? If the principal of a note is $30,000, the interest is $500 and the time is 60 days, what is the interest rate? 7. Determine the due date and amount of interest due at maturity on the following notes: Origination Face Ter InterestMaturity Interest Date Amount Amount of Note Rate $4,000 60 days $9,000 90days 8% Date 9% (a) Mar 1 (b) May 15

Explanation / Answer

a) 1) Bad debt expense 20600 (20000+600)             Allowance for doubtful accounts 20600 2) Allowance for doubtful accounts 550             Accounts receivable 550 3) Accounts receivable 200              Allowance for doubtful accounts 200 Cash 200         Accounts receivable 200 4) Cash 400         Accounts receivable 400 Allowance for doubtful accounts 200             Accounts receivable 200 b) Accounts receivable 800000 Allowance for doubtful accounts -20000 Net reaizable value 780000 c) 2) Bad debt expense 550             Accounts receivable 550 3) Accounts receivable 200             Bad debt expense 200 Cash 200         Accounts receivable 200 4) Cash 400         Accounts receivable 400 Bad debt expense 200             Accounts receivable 200

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