Question

stibles) The tibles) The Septer May 31, 20X7. P5-76B. (Learning Objective 4: Using the aging approach for uno 30, 20X7, records of Image Communications include these account Accounts receivable........ Allowance for doubtful accounts....... €290,000 (9,700) At year-end, the company ages its receivables and adjusts the balance in Allowance for Doubtful Accounts to correspond to the aging schedule. During the last quarter of 20X7. the company completed the following selected transactions: MOD Dec. 28 Wrote off as uncollectible the €1,300 account receivable from Blue Carpets and the €700 account receivable from Show.N Tell Antiques. The Dec. 31 Adjusted the Allowance for Doubtful Accounts and recorded doubtful-account expense at year-end, based on the aging of o r receivables, which follows. b Total Balance Age of Accounts 31-60 Days 61-90 Days €40,000 €18,000 1.0% 10.0% 1-30 Days €160,000 0.5% €238,000 Estimated uncollectible Over 90 Days €20,000 50.0% Requirements 1. Record the transactions in the journal. Explanations are not required. 2. Prepare a T-account for Allowance for Doubtful Accounts and post to that account 2 Show how Image Communications will report its accounts receivable on its Balance at December 31, 20X7. P5-77B. (Learning Objective 4: Accounting for notes receivable and accrued interest revenue Organic Meals completed the following selected transactions:

Answer 1

1.

Credit Date Account title and explanation Dec. 28 Allowance for doubtful accounts Accounts receivable-Blue Carpets Accounts receivable-Show N Tell Antiques (To record the write off) Debit 1,300 700 2,000 5,300 Dec. 31 Bad debt expense (13,000-9,700+2,000) Allowance for doubtful accounts (To record the adjusting entry) 5,300

Working note:

Receivable Estimated uncollectible Amount of estimated uncollectible 1-30 days 31-60 days 61-90 days (over 90 days Total 160,000 40,000 18,000 20,000 0.50% 1.00% 10.00% 50.00% 800 400 – 1,800 - 10,000 13,000

2.

9,700 Allowance for doubtful accounts Dec. 28 write off 2,000 Beg. Bal. Bad debt expense (Adjusting entry) End. Bal. 5,300 13,000

3.

Image communications Balance sheet (Partial) As at December 31, 20X7 Current assets: Accounts receivable, Gross (290,000-2,000) Less: Allowance for doubtful accounts Accounts receivable, Net 288,000 - 13,000 275,000