Adham Sdn. Bhd. accounts for its uncollectible accounts usingthe allowance method. The company reported the following accountbalances at 31 December 2017.
RM
Accounts receivable
250,000
Less: Allowance for doubtful accounts
12,500
During the year 2017, the company had the following transactionsrelated to receivables.
RM
1.Credit sales
600,000
3.Collections of accounts receivable
680,000
4.Write-offs of accounts receivable
10,800
5.Recovery of bad debts previously written off
3,000
Required:
a) Journalise transactions 1 - 5 above.
b) Post the entries to the two accounts: Accounts receivable andAllowance for doubtful account.
c) Record the bad debt expense for 2017 (in T-account) undereach of the following independent assumptions:
i. The company estimates its bad debt expense based on 5% ofoutstanding account receivable balance.
ii. The company bad debt estimate is 1% of its credit sales.
d) What is the net realisable value of Accounts Receivable at 31December 2017 under assumption (i) above.
Adham Sdn. Bhd. accounts for its uncollectible accounts usingthe allowance method. The company reported the following accountbalances at 31 December 2017.
RM | |
Accounts receivable | 250,000 |
Less: Allowance for doubtful accounts | 12,500 |
During the year 2017, the company had the following transactionsrelated to receivables.
RM | |
1.Credit sales | 600,000 |
3.Collections of accounts receivable | 680,000 |
4.Write-offs of accounts receivable | 10,800 |
5.Recovery of bad debts previously written off | 3,000 |
Required:
a) Journalise transactions 1 - 5 above.
b) Post the entries to the two accounts: Accounts receivable andAllowance for doubtful account.
c) Record the bad debt expense for 2017 (in T-account) undereach of the following independent assumptions:
i. The company estimates its bad debt expense based on 5% ofoutstanding account receivable balance.
ii. The company bad debt estimate is 1% of its credit sales.
d) What is the net realisable value of Accounts Receivable at 31December 2017 under assumption (i) above.
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Problem 9-2A Estimating and reporting bad debts LO P2, P3
[The following information applies to the questions displayed below.]
At December 31, 2017, Hawke Company reports the following results for its calendar year.
| Cash sales | $ | 1,305,010 | |
| Credit sales | 3,261,000 | ||
In addition, its unadjusted trial balance includes the following items.
| Accounts receivable | $ | 988,083 | debit |
| Allowance for doubtful accounts | 16,930 | debit | |
Problem 9-2A Part 1
Required:
1. Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.
a. Bad debts are estimated to be 2% of credit sales.
b. Bad debts are estimated to be 1% of total sales.
c. An aging analysis estimates that 5% of year-end accounts receivable are uncollectible.
Adjusting entries (all dated December 31, 2017).
Problem 9-2A Part 2
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a.
Problem 9-2A Part 3
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1c.
