AFM123 Study Guide - Accounts Receivable, Trial Balance, Kraft Foods Inc

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20 Dec 2014

School

University of Waterloo

Department

Accounting & Financial Management

Course

AFM123

Professor

Richard Ennis

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Document Summary

Kraft foods inc. is the second-largest food company in the world. Assume the company recently reported the following amounts in its unadjusted trial balance as of december 31, 2011 (all amounts in millions): Kraft foods inc. has prepared the following aging of accounts receivable analysis for the month ended december 31, 2011: 833: prepare the adjusting journal entry required for the year, assuming no bad. Ending afda = 30 + 25 + 125 = 180. 180 end. dr bad debt expense (+e,-se) cr allowance for doubtful accounts (+xa,-a)

Related Questions

The A.T. Cross Company is well known for its Crosspens. The company recently reported the following amounts in itsunadjusted trial balance as of December 31, 2010.

Assume Cross uses ¹/₂ of 1 percent ofsales to estimate its bad debt expense for the year. Prepare theadjusting journal entry required at December 31, 2010, forrecording Bad Debt Expense. (TIP: The percentage of credit salesmethod directly calculates Bad Debt Expense.)

Assume instead that Cross uses the aging of accounts receivablemethod and estimates that $1,005,000 of Accounts Receivable will beuncollectible. Prepare the adjusting journal entry required atDecember 31, 2010, for recording bad debt expense. (TIP: The agingof accounts receivable method focuses on calculating what theadjusted Allowance for Doubtful Accounts balance should be. Youneed to consider the existing balance when determining theadjustment.)

3.	Assume instead that Cross uses the aging of accounts receivablemethod and estimates that $1,005,000 of Accounts Receivable will beuncollectible and unadjusted balance in Cross

ultramarinecicada210

Learning Objective 4: Apply GAAP to uncollectible receivables at December 31, 2016, before any year-end adjustments, the Accounts Receivable balance of Haley Travel, Inc., is $400,000. The Allowance for Doubtful Accounts has a $19,600 credit balance. Haley Travel prepares the following aging schedule for Accounts Receivable:

Age of Accounts

Total Balance 1-30 Days 31-60 Days 61-90 Days Over 90 Days

$400,000 $180,000 $120,000 $80,000 $20,000

Estimated uncollectible 0.5% 5.0% 11.0% 50.0%

Requirements:

1. Based on the aging of Accounts Receivable, is the unadjusted balance of the allowance account adequate? Too high? Too low?

2. Make the entry required by the aging schedule. Prepare a T-account for the allowance.

3. Show how Haley Travel will report Accounts Receivable on its December 31 balance sheet

Solution:

	Req. 1




			1-30	31-60	61-90	Over 90	Total
			days	days	days	days	balance

	Est. % uncollectible		x .005	x .05	x .11	x .50
	Bal. in Allow. for Doubtful Accounts should be
	Bal. in Allow. for Doubtful Accounts should be		$ 0	$ 0	$ 0	$ 0	$ -
	Current balance
	Amount needed in adj. entry

	Req. 2
	Journal
	DATE	ACCOUNT TITLES AND EXPLANATION				DEBIT	CREDIT
	Dec. 31
							-



		Allowance for Doubtful Accounts


			Bal.



	Req. 3
	BALANCE SHEET
	Current assets:
		Cash					$ XX
		Short-term investments					XX
		Accounts receivable, net of allowance
		for doubtful accounts of $					*
	Or
	*Another way to report accounts receivable is
		Accounts receivable
		Less: Allowance for doubtful accounts

coffeesalmon341

Age of Accounts

Total Balance 1-30 Days 31-60 Days 61-90 Days Over 90 Days

$400,000 $180,000 $120,000 $80,000 $20,000

Estimated uncollectible 0.5% 5.0% 11.0% 50.0%

Requirements:

1. Based on the aging of Accounts Receivable, is the unadjusted balance of the allowance account adequate? Too high? Too low?

2. Make the entry required by the aging schedule. Prepare a T-account for the allowance.

3. Show how Haley Travel will report Accounts Receivable on its December 31 balance sheet

Solution:

	Req. 1




			1-30	31-60	61-90	Over 90	Total
			days	days	days	days	balance

	Est. % uncollectible		x .005	x .05	x .11	x .50
	Bal. in Allow. for Doubtful Accounts should be
	Bal. in Allow. for Doubtful Accounts should be		$ 0	$ 0	$ 0	$ 0	$ -
	Current balance
	Amount needed in adj. entry

	Req. 2
	Journal
	DATE	ACCOUNT TITLES AND EXPLANATION				DEBIT	CREDIT
	Dec. 31
							-



		Allowance for Doubtful Accounts


			Bal.



	Req. 3
	BALANCE SHEET
	Current assets:
		Cash					$
		Short-term investments
		Accounts receivable, net of allowance
		for doubtful accounts of $					*
	Or
	*Another way to report accounts receivable is
		Accounts receivable
		Less: Allowance for doubtful accounts

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AFM123 Study Guide - Accounts Receivable, Trial Balance, Kraft Foods Inc

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