Question

onsel statemsent f The following sa Chapters 18, 7 and 8 th tice test to help you idA t above, The sample es III. Accounts Receivable (15 points) Platinum Pools Company has the following information reported on its 2003 comparative Balance Sheet 2002 2003 $1,027,000 $958,000 Accounts Receivable (less allowances for doubtful accounts of S14,000 in 2003 and $17,500 in 2002) Additional information: During 2003, Platinum wrote-off $20,000 of accounts that had been identified as uncollectible. Platinum makes all sales on account and collected $2,500,000 from customers in 2003 REQUIRED: Provide answers to questions 1-4 in the space provided. 1 Provide the journal entry that Platinum made during 2003 to record the write-off Account name Credit Debit 2. What is the amount of Platinum's 2003 credit sales? 2003 Credit Sales 3. What is the amount that Platinum recorded as bad debt expense on its 2003 income statement? 2003 Bad debt expense 4. Assuming Platinum used a balance sheet approach with a single bad debt rate (rather than multiple rates from aging specific receivables) in estimating bad debt expense, what is the bad debt rate applied in 2003? 2003 Bad debt rate

Answer 1

As per HOMEWORKLIB POLICY and guidelines, the 1^st-question is answered below:

Accounts receivable:

1.

Allowance for doubtful account is debit, since the provision is used for write-off. Accounts receivable is credit, since it reduces current asset.

Journal

Date	Account name and explanations	Ref.	Debit	Credit
	Allowance for doubtful accounts		$20,000
	Accounts receivable			$20,000
	To record write-off of accounts receivable.

2.

Credit sale = Collection of cash + (2003 accounts receivable + Allowance for doubtful accounts) – (2002 accounts receivable + Allowance for doubtful accounts)

                   = 2,500,000 + (958,000 + 14,000) – (1,027,000 + 17,500)

                   = 2,500,000 + 972,000 – 1,044,500

                        = 2,427,500 (Answer)

3.

Bad debt expense = Write-off amount + 2003 allowance for doubtful accounts – 2002 allowance for doubtful accounts

                               = 20,000 + 14,000 – 17,500

                               = 16,500 (Answer)

4.

Bad debt rate is done on the gross accounts receivable of 2003.

Gross AR = 2003 accounts receivable + Allowance for doubtful accounts

                 = 958,000 + 14,000

                 = 972,000

Bad debt rate = (Bad debt expense / Gross AR) × 100

                        = (16,500 / 972,000) × 100

                        = 1.70% (Answer)