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3 Feb 2018

---> Morgan Company provides you with anaged accounts receivable balance as follows:

Days Outstanding $Amount Est %Uncollectible

0-30 2,350,000 3%

31-60 1,110,000 7%

61-90 750,000 8%

91-120 300,000 10%

120+ 62,000 100%

total 4,572,000

The current allowance for doubtful accounts balance beforewrite-offs is $91,000.

Required:

Assuming Ethan Co uses the balance sheet (AR balance)approach:

-Record the write off of uncollectible accounts.

-What is the new allowance for doubtful accounts balance afterall adjustments?

-What is the bad debt expense, record the entry.

-What is the new Net Realizable Value of the receivable on thebalance sheet?

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Reid Wolff
Reid WolffLv2
4 Feb 2018

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Nash Company had the following data on December 31, 20X1, before any adjustments: Accounts Receivable, December 31 Not past due $113,500 1 to 30 days past due $50,100 31 to 60 days past due $28,630 61 to 90 days past due $10,360 more than 90 days past due $4,500 Total Accounts Receivable, December 31 $207,090 Percentages of Accounts Receivable Estimated to be Uncollectible Not past due 2% 1 to 30 days past due 5% 31 to 60 days past due 10% 61 to 90 days past due 20% more than 90 days past due 50% Allowance for Doubtful Accounts, December 31 (before adjustment) $2,960 credit Total credit sales $4,094,000 Based on this data, estimate the amount of Bad Debt Expense that Nash Company should record in its December 31, 20X1 adjusting entry, and the ending balance (after adjustment) in the Allowance for Doubtful Accounts:

Allowance for Doubtful Accounts, Dec 31 (before adjustment): $2,960 credit

Bad Debt Expense:

Allowance for Doubtful Accounts, Dec 31 (after adjustment):

What is the Bad Debt Expense and Allowance for Doubtful Accounts, Dec 31 (after adjustment):

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following: Current assets: Receivables, net of allowance for uncollectible accounts of $48,000 $ 522,000 During 2018, credit sales were $1,840,000, cash collections from customers $1,920,000, and $57,000 in accounts receivable were written off. In addition, $4,800 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following: Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0–60 days 70 % 5 % 61–90 days 20 15 91–120 days 5 20 Over 120 days 5 40 Required: 1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: Bad debt expense is estimated to be 4% of credit sales for the year. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable. 3. For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

Rianna.com uses the allowance method of accounting for baddebts. The company produced the following aging of the accountsreceivable at year-end.

Total

Number of Days Outstanding

0-30

31-60

61-90

91-120

Over 120

Accounts receivable

$377,000

$222,000

$90,000

$38,000

$15,000

$12,000

% uncollectible

1%

4%

5%

8%

10%

Estimated bad debts

Instructions

(a)

Calculate the total estimated bad debts based on the aboveinformation.

Tot est.

bad debts

$10,120

(b)

Prepare the year-end adjusting journal entry to record the baddebts using the aged uncollectible accounts receivable determinedin (a). Assume the unadjusted balance in Allowance for DoubtfulAccounts is a $4,000 debit.

(c)

Of the above accounts, $5,000 is determined to be specificallyuncollectible. Prepare the journal entry to write off theuncollectible account.

(d)

The company collects $5,000 subsequently on a specific accountthat had previously been determined to be uncollectible in (c).Prepare the journal entry(ies) necessary to restore the account andrecord the cash collection.

(e)

Comment on how your answers to (a)-(d) would change ifRianna.com used 3% of total accounts receivable, rather than agingthe accounts receivable. What are the advantages to the company ofaging the accounts receivable rather than applying a percentage tototal accounts receivable?

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