Question

ULUS balances classified by the length of time they have been unpaid. Problems: Set A PS.LA (LO 2), AP Rianna.com uses the allowance method of accounting for bad debts. The company produced the following aging of the accounts receivable at year-end. Journaline transactions related to bad debts. Total $377,000 Accounts receivable Suncollectible Estimated bad debts Number of Days Outstanding 0-30 3 1-60 61-90 91-120 $222,000 $90,000 $38,000 $15,000 1945 58 Over 120 $12.000 106 a. Totest. bad debts $10,120 Instructions a. Calculate the total estimated bad debts based on the above information. Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible accounts receivable determined in (a). Assume the unadjusted balance in Allowance for Doubtful Accounts is a $4.000 debit. c. or the above accounts, $5,000 is determined to be specifically uncollectible. Prepare the journal entry to write of the uncollectible account. d. The company collects $5,000 subsequently on a specific account that had previously been deter mined to be uncollectible in (C). Prepare the journal entry(les) necessary to restore the account and record the cash collection e. Comment on how your answers to (a)(d) would change if Rianna.com used 36 of total accounts receivable, rather than aging the accounts receivable. What are the advantages to the company of aging the accounts receivable rather than applying a percentage to total accounts receivable?

Answer 1

Answer: a) We can estimate bad debt's as below, 222000 10001 22200.0 → 10-4. 2220.00 > 10%. we have to determine Similarly below, for all the values as Accounts receivable + p Total 377000 229000 31-60 61-90 91-120 l over 120 90000 38000 15000 12000 to uncollectible lol Estimated bud debels + 10120 2020 3600 19001 1200 1200 So, bad debt's 10120 . the total estimated General journal Bad debt's Expense > TORO+ 4000 14120 (debt) Allowance for bad debts - 10120 +4000 = 14120 (Credit)

1o. of the above accounts $5000 then, General Journal Debit Coredit Allowance for bad debts 5000 Account receivable 5000 5000 company collect's this there are 5000 In 2 Cases in general journal General Account Journal receivable :) 5000 C Debit) Allowance for bad debts 5000 Ccoredit) ii) Cash Accocent receivable 5000 CDebit) > 5000. (coredit).

- from take, the tofal given 377000 377000 X30% +4000 > 1131044000 5310 NOW General sournal will be Bad debts Expense . Allowance for bad debts 15310 C Debit) > 15310 (Coredit) As shows in above we are using percentage method insted of aging method then there is change in bad debts in total accounts outstanding and this aging method is more accurate.