12. Raintree Cosmetic Company sells its products to customers ona credit basis. An adjusting entry for bad debt expense is recordedonly at December 31, the companyâs fiscal year-end. The 2015balance sheet disclosed the following:
Current assets: Receivables, net of allowance for uncollectibleaccounts of $39,000 $477,000
During 2016, credit sales were $1,795,000,cash collections from customers $1,875,000, and $44,000 in accountsreceivable were written off. In addition, $3,900 was collected froma customer whose account was written off in 2015. An aging ofaccounts receivable at December 31, 2016, reveals thefollowing:
Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0â60 days 70 % 5% 61â90 days 20 15 91â120 days 5 20 Over 120 days 5 40
Required:
2. Prepare the year-endadjusting entry for bad debts according to each of the followingsituations:
a. Bad debt expense isestimated to be 4% of credit sales for the year. b. Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isestimated to be 10% of the year-end balance in accountsreceivable.
c. Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isdetermined by an aging of accounts receivable.
(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.)
3. For situations (a)â(c) in requirement 2 above, what would be thenet amount of accounts receivable reported in the 2016 balancesheet?
12. Raintree Cosmetic Company sells its products to customers ona credit basis. An adjusting entry for bad debt expense is recordedonly at December 31, the companyâs fiscal year-end. The 2015balance sheet disclosed the following: |
Current assets: | |||||
Receivables, net of allowance for uncollectibleaccounts of $39,000 $477,000 | |||||
During 2016, credit sales were $1,795,000,cash collections from customers $1,875,000, and $44,000 in accountsreceivable were written off. In addition, $3,900 was collected froma customer whose account was written off in 2015. An aging ofaccounts receivable at December 31, 2016, reveals thefollowing: |
Percentage of Year-End | Percent | ||||
Age Group | Receivables in Group | Uncollectible | |||
0â60 days | 70 | % | 5% | ||
61â90 days | 20 | 15 | |||
91â120 days | 5 | 20 | |||
Over 120 days | 5 | 40 | |||
Required: |
2. | Prepare the year-endadjusting entry for bad debts according to each of the followingsituations: |
a. | Bad debt expense isestimated to be 4% of credit sales for the year. |
b. | Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isestimated to be 10% of the year-end balance in accountsreceivable. |
c. | Bad debt expense is estimated by computing net realizable valueof the receivables. The allowance for uncollectible accounts isdetermined by an aging of accounts receivable. |
(If no entry is required for a transaction/event, select"No journal entry required" in the first accountfield.) | |
3. | For situations (a)â(c) in requirement 2 above, what would be thenet amount of accounts receivable reported in the 2016 balancesheet? |