Question

It’s all problem 12

12. 1000 poants Raintree Cosmetic Company sells its products to customers on a credit bass. An adjusting entry for bad debt expense is recorded only at December 31, the company's fiscal year end The 2015 balance sheet disclosed the following Current assets Receivables, net of allowance for uncollectible accounts of $44,000 $502.000 During 2016, credit sales were $1,820,000, cash collections from customers $1,900,000, and $53,000 in wrilthen off in 2015 An aging of accounts receivable at December 31, 2016, reveals the following accounts receivable were witon off In addition, $4,400 was colected from a customeor whose account was Percentage of Year-End Recelvables in Group 65% 15 Percent Age Group 0-60 days 61-90 days 91-120 days Over 120 days 10 30 50 summary journal entries to account for the 2016 write-ofts and the collection of the receivable previously written off f no entry is required for a transectionlevent, select "No journal entry required" in the first account fiek 1 Record accounts receivable written off during the year 2016 2 Record entry to reinstate an account receivable previously written off 3 Record collection of an account receivable previously written off

Answer 1

Solution 1:

Gross receivables at the end of 2016 = Beginning accounts receivables + Credit sales - Collection - Accounts receivables written off

= $546,000 + $1,820,000 - $1,900,000 - $53,000 = $413,000

Journal Entry 1 - Raintree Cosmetic Company
Event	Particulars	Debit	Credit
1	Allowance for doubtful accounts Dr	$53,000.00
	To Accounts receivables		$53,000.00
	(To written of accounts receivables)
2	Accounts receivables Dr	$4,400.00
	To Allowance for doubtful accounts		$4,400.00
	(To reinstate account previously written off)
3	Cash Dr	$4,400.00
	To Accounts receivables		$4,400.00
	(To record collection of accounts previously written off)

Solution 2;

Computation of Allowance for Uncollectible Accounts
Ageing	% of year end receivables in Group	Accounts Receivables	% Uncollectible	Required Allowance
0-60 days	65%	$268,450.00	4%	$10,738.00
61-90 days	15%	$61,950.00	10%	$6,195.00
91-120 days	15%	$61,950.00	30%	$18,585.00
Over 120 days	5%	$20,650.00	50%	$10,325.00
Total		$413,000.00		$45,843.00

Journal Entry 2 - Raintree Cosmetic Company
Event	Particulars	Debit	Credit
a	Bad debts Expense Dr ($1,820,000*3%)	$54,600.00
	To Allowance for doubtful accounts		$54,600.00
	(To record bad debts expense)
b	Bad debts Expense Dr ($413,000*10% + $4,600)	$45,900.00
	To Allowance for doubtful accounts		$45,900.00
	(To record bad debts expense)
c	Bad debts Expense Dr ($45,843 + $4,400)	$50,443.00
	To Allowance for doubtful accounts		$50,443.00
	(To record bad debts expense)

Solution 3:

a. net accounts receivables = Gross receivables - Allowance for doubtful accounts

= $413,000 - ($54,600 - $4,600) = $363,000

b. Net accounts receivables = $413,000 - $41,300 = $371,700

c. Net accounts receivables = $413,000 - $45,843 = $367,157