Question

Raintree Cosmetic Company sels its groducts to customers on a credit basis. An adiusting entry for bad debt expense is recorded only ar December 31, the company's fiscal year-end The 2020 balance sheet disclosed the folowing Current assets Receivables, net of alowance for uncollectible accounts of $50 000 $432,000 During 2021, credit sales were $1.750.000, cash colecions from customers S1.830.000 and $35 000 in accounts mceivable were wrte addition, $3 000 was collected from a qustomer whose account was witen ofin 2020 An aging of accounts receivatble at December 31. reveals the following Peroantsge of Year End Receivables in Group e5% Percent Uncoledble 4% Age Group 0-60 days 81-00 days 91-120 days Over 120 days 15 25 40 20 10 5 Required: 1. Prepare summary joumal entries to account for the 2021 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjsting entry for bad debts acoording to each of the folowing stuations a. Bad debt expense is estimated to be 3% of credk sales for the year. b. Bad debt expense is estimated by adjusting the alowance for uncoledible acoounts to the balance that reduces the carrying value of acm receivable to the amourt of cash expected to be colected The alowance tor uncollecible accounts is estimated to be 10 % of the year-em in accounts recevable c. Bad debt expense is estimated by adjusling the alowance tor uncoledible accounts to the balance that reduces the carrying value of apm receivable to the amount of cash expected to be coliected. The allowance for uncollectible aocounts is determined by an aging of account 3. For situations lo-cl n requirement2 ebove, whet would be the net amount of accounts recevable reported in the 2021 balance sheer? receivable Complete this question by entering your answers in the tabs below.

Answer 1

1	Date	Account titles						Debit	Credit
	2021	Allowance for uncollectble accounts						35000
		Accounts receivable							35000
		(Accounts receivable written-off)
		Accounts receivable						3000
		Allowance for uncollectble accounts							3000
		(Accounts receivable re-instated)
		Cash						3000
		Accounts receivable							3000
		(Cash collected on re-instated account)
2
a.	Baddebt expense=1750000*3%=$ 52500
	Date	Account titles						Debit	Credit
	Dec 31.	Baddebt expense						52500
		Allowance for uncollectble accounts							52500
		(Baddebt expense recorded)
b.	Estimated balance in allowance for uncollectble accounts=Accounts receivable balance*10%
	Year end accounts receivable balance:
					$	$
	Beginning balance		(432000+30000)			462000
	Add:
	Credit sales					1750000
	Reinstated					3000
						2215000
	Less:
	Written off				35000
	Cash collected		(1830000+3000)		1833000	1868000
	Ending balance					347000
	Estimated balance in allowance for uncollectble accounts=347000*10%=$ 34700
	Current balance in allowance for uncollectble accounts:
						$
	Beginning balance					30000
	Add:Reinstated					3000
						33000
	Less: Accounts written off					35000
	Ending balance					-2000
	Current balance in allowance for uncollectble accounts=$ 2000 debit
	Adjustment to be made=34700+2000=$ 36700
	Date	Account titles						Debit	Credit
	Dec 31.	Baddebt expense						36700
		Allowance for uncollectble accounts							36700
		(Baddebt expense recorded)
c.	Ending balance of accounts receivable=$ 347000
	Estimated balance in allowance for uncollectble accounts:
	Age group		% of year end receivables in group	Receivables in $	% uncollectble	Estimated allowance
			a	b=347000*a	c	d=b*c
	0-60 days		65%	225550	4%	9022
	61-90 days		20%	69400	15%	10410
	91-120 days		10%	34700	25%	8675
	Over 120 days		5%	17350	40%	6940
	Total					35047
	Estimated balance in allowance for uncollectble accounts=$ 35047
	Current balance in allowance for uncollectble accounts=$ 2000 debit
	Adjustment to be made=35047+2000=$ 37047
	Date	Account titles						Debit	Credit
	Dec 31.	Baddebt expense						37047
		Allowance for uncollectble accounts							37047
		(Baddebt expense recorded)
3	Accounts receivable to be reported in the balance sheet=Accounts receivable-Allowance for uncollectble accounts
a.	Allowance for uncollectble accounts=-2000+52500=$ 50500
	Accounts receivable to be reported in the balance sheet=347000-50500=$ 296500
b.	Allowance for uncollectble accounts=-2000+36700=$ 34700
	Accounts receivable to be reported in the balance sheet=347000-34700=$ 312300
c.	Allowance for uncollectble accounts=-2000+37047=$ 35047
	Accounts receivable to be reported in the balance sheet=347000-35047=$ 311953