Question

Accounting 201 Quiz # 10 Name The following information relates to calendar year 2011: The balance in account receivables at January 1, 2011 is $3,200, The allowance for uncollectible accounts at January 1, 2011 is $100 (normal balance) Total sales for the year are $780,000, of which $160,000 are cash sales; Cost of Goods Sold for the above sales amounted to $400,000; Accounts Receivable written off during the year amount to $6,800; Cash collected from customers for payment of their accounts were $423,300; Prepare the necessary adjusting journal entries, dated December 31, 2011, to record bad debts expense under the following independent assumptions: a. 1.5% of credit sales b.5% of the ending accounts receivable balance. The following information relates to 2012 Sales on account are $700,000; Cost of Goods Sold are $425.000 Cash collected from customers on account during 2012 amounted to $ 730,000 Accounts receivable written off during 2012 was $18,500; Prepare the necessary adjusting journal entries, dated December 31, 2012, to record bad debts expense under the following independent assumption. a. Assuming you used 1.5% of credit sales in 2011, what is the AJE to record bad debt expense, assuming 3.4% of credit sales is used in 2012 b. Assuming you used 5% of accounts receivable balance at December 31, 2011. what is the AJE to record bad debts expense, assuming 5% of accounts receivable balance is used in 2012 1. What is the account receivable balance at December 31, 2012 2. What is the allowance for uncollectible account balance at December 31, 2012 if 1.5% of credit sales was used in 2011 and 3.4% of credit sales used in 2012. 3. What is the allowance for uncollectible account balance at December 31, 2012 if 5% of accounts receivable is used to estimate bad debt expense in both 2011 and 2012?

Answer 1

Year 2011

Assumption a:

Adjusting entry:

Date	Account title and explanation	Debit	Credit
Dec 31,2011	Bad debt expense	$9,300
	Allowance for uncollectible		$9,300
	[To record bad debt expense]

Calculations:

Total sales	$780,000
(-) Cash sales	($160,000)
Credit sales	$620,000
x % of Uncollectible	1.50%
= Bad debt expense	$9,300

Assumption b:

Date	Account title and explanation	Debit	Credit
Dec 31,2011	Bad debt expense	$16,355
	Allowance for uncollectible		$16,355
	[To record bad debt expense]

Calculations:

Accounts receivable
Jan 1,2011	$3,200	Written off	$6,800
Credit sales	$620,000	Collections	$423,300
End.	$193,100
Allowance for uncollectible
Written off	$6,800	Jan 1,2011	$100
		Bad debt expense	$16,355
		End. [193,100 x 5%]	$9,655

Year 2012

Assumption a

Date	Account title and explanation	Debit	Credit
Dec 31,2012	Bad debt expense	$23,800
	Allowance for uncollectible		$23,800
	[To record bad debt expense]

Calculation:

Credit sales	$700,000
x % of Uncollectible	3.40%
= Bad debt expense	$23,800

Assumption b:

Date	Account title and explanation	Debit	Credit
Dec 31,2011	Bad debt expense	$16,075
	Allowance for uncollectible		$16,075
	[To record bad debt expense]

Calculations:

Accounts receivable
Jan 1,2012	$193,100	Collections	$730,000
Credit sales	$700,000	Written off	$18,500
End.	$144,600
Allowance for uncollectible
Written off	$18,500	Jan 1,2012	$9,655
		Bad debt expense	$16,075
		End. [144,600 x 5%]	$7,230

Question 1:

Accounts receivable balance is $144,600

Calculation:

Accounts receivable
Jan 1,2011	$3,200	Written off	$6,800
Credit sales	$620,000	Collections	$423,300
End.	$193,100

Accounts receivable
Jan 1,2012	$193,100	Collections	$730,000
Credit sales	$700,000	Written off	$18,500
End.	$144,600

Question 2:

Uncollectible balance as on Dec 31,2012 is $7,900

Calculations:

Allowance for uncollectible
Written off	$6,800	Jan 1,2011	$100
		Bad debt expense	$9,300
		End.	$2,600

Allowance for uncollectible
Written off	$18,500	Jan 1,2012	$2,600
		Bad debt expense	$23,800
		End.	$7,900

Question 3:

Uncollectible balance as on Dec 31,2012 is $7,230

Allowance for uncollectible
Written off	$6,800	Jan 1,2011	$100
		Bad debt expense	$16,355
		End. [193,100 x 5%]	$9,655

Allowance for uncollectible
Written off	$18,500	Jan 1,2012	$9,655
		Bad debt expense	$16,075
		End. [144,600 x 5%]	$7,230