Question

Required: 1. Prepare summary journal entries to account for the 2021 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: a. Bad debt expense is estimated to be 2% of credit sales for the year. b. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. c. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. 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 2021 balance sheet?
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Answer 1

Solutions:

Credit Solution 1 Journal Entry 1 - Raintree Cosmetic Company Event Particulars | Debit 1 Allowance for doubtful accounts Dr $55,000 To Accounts receivables (To record written of accounts receivables) $55,000 2 $4,600 Accounts receivables Dr To Allowance for doubtful accounts (To reinstate account previously written off) $4,600 $4,600 $4,600 Cash Dr To Accounts receivables (To record collection of accounts previously written off) SOLUTION 2: ending balance of Gross accounts receivable = =512000+46000+1830000-1910000-55000 = $423,000 Ending unadjusted balance of allowance for doubtful account = -46000-55000+4600 = $4400 Debit balance Credit Event a Journal Entry 2 - Raintree Cosmetic Company Particulars Debit Bad debts Expense Dr ($1,830,000*2%) $36,600.00 To Allowance for doubtful accounts (To record bad debts expense) $36,600.00 b $46,700.00 Bad debts Expense Dr ($423,000* 10% + $4400) To Allowance for doubtful accounts (To record bad debts expense) $46,700.00 30 31 $54,314.00 Bad debts Expense Dr ($49914+ $4400) (Note 1) To Allowance for doubtful accounts (To record bad debts expense) $54,314.00 Note 1 Ageing 0-60 days 61-90 days 91-120 days Over 120 days Total Computation of Allowance for Uncollectible Accounts % of year end receivables ccounts Receivable% UncollectibleRequired Allowance in Group 60% $253,800.00 3% $7,614.00 10% $42,300.00 5% $2,115.00 20% $84,600.00 25% $21,150.00 10% $42,300.00 45% $19,035.00 $423,000.00 $49,914.00 SOLUTION 3: a. ($36600-$4400) b. ($423000*10%) Accounts Ending Allowance Net realizable recivable Accounts Balance value $423,000 $32,200 $390,800 $423,000 $42,300 $380,700 $423,000 $49,914 $373,086 Sheet954 Sheet36 (21) Sheet635 Sheet636 ) She