Question

he following transactions were completed by Daws Company during the current fiscal year ended December 31:

Jan. 29	Received 40% of the $17,000 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible.
Apr. 18	Reinstated the account of Spencer Clark, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,405 cash in full payment of Clark’s account.
Aug. 9	Wrote off the $6,460 balance owed by Iron Horse Co., which has no assets.
Nov. 7	Reinstated the account of Vinyl Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,940 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,095; DeVine Co., $5,540; Moser Distributors, $9,495; Oceanic Optics, $1,035.
Dec. 31	Based on an analysis of the $1,782,000 of accounts receivable, it was estimated that $35,640 will be uncollectible. Journalized the adjusting entry.

	Required:
1.	Record the January 1 credit balance of $25,615 in a T account for Allowance for Doubtful Accounts.
2.	A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,782,000 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses. B. Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.
3.	Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
4.	Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables the adjusting entry on December 31 had been based on an estimated expense of ¼ of 1% of the sales of $17,760,000 for the year, determine the following: A. Bad debt expense for the year. B. Balance in the allowance account after the adjustment of December 31. C. Expected net realizable value of the accounts receivable as of December 31.

Answer 1

Daws company Part 1 - journal Entries Jan. 29 Cash ( 17000 * 40 %) Allowance for doubtful debts Accounts receivable-Decoy 6800 10200 Allowance for doubtful debts Accounts receivable 10200 Opening balance Accounts receivable 6460 Accounts receivable 23165 Accounts receivable Closing Balance (given) 35640 Bad debt exp.( balancing figure) 25615 7405 3940 38505 17000 7405 75465 75465 Apr-18 Accounts receivable - Clerk Allowance for doubtful debts (To reinstate the account previously written off) 7405 7405 Cash Accounts receivable - Clerk (to rceord the collection) 7405 Allowance for doubtful debts required format Accounts receivable 10200 Opening balance Accounts receivable 6460 Accounts receivable Accounts receivable 23165 Accounts receivable Unadjusted balance Adjusting entry Adjusted balance 25615 7405 3940 -2865 38505 35640 Aug.9 6460 Allowance for doubtful debts Accounts receivable- Horse (To record the write off) 6460 Bad debt exp. 38505 Adjusting entry Nov. 7 3940 Accounts receivable-Vinyl Allowance for doubtful debts (To reinstate the account previously written off) 3940 Part 3 Gross amount Less:- Allowance NRV 1782000 (since opening bal. was not given therefore, figure given 35640 in last point has been assumed to be net of all adjustements) 1746360 3940 Cash Accounts receivable- Vinyl (to rceord the collection) 3940 Part 4 Bad debt exp. = 17760000 * 0.25 % = 44400 23165 Dec. 31 Allowance for doubtful debts Accounts receivable (To record the write off) 23165 38505 Dec. 31 Bad debt exp. Allowance for doubtful debts Allowance for doubtful debts required format Accounts receivable 10200 Opening balance Accounts receivable 6460 Accounts receivable Accounts receivable 23165 Accounts receivable Unadjusted balance Adjusting entry Adjusted balance 25615 7405 3940 -2865 44400 41535 38505 Gross amount Less:- Allowance NRV 1782000 41535 1740465

Answer 2

Received 40% of the $18,200 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible.