Question

Intermediate Accounting Test 2 33. On December 31, the Jacob, Inc. general ledger contained the following balances prior to write-offs and adjustments Trade Accounts Receivable $ 623,450 Allowance for Doubtful Accounts 15,800 (credit) Net Credit Sales 2,529,000 Before completing an aging analysis to determine the estimated amount uncollectible, Jacob decided to write off $7,500 of an account past due over 360 days. Aging of the accounts receivable balance after the write-off on December 31 indicated the following: Estimated Percentage Age Amount Uncollectible Under 30 days $358,900 1.5% 30-90 days 134,000 3.0% 91-180 days 96,000 7.0% 181-360 days 22,700 20.0% Over 360 days 4,350 60.0% S615,950 Required: Prepare the necessary journal entry to record the write-off. Prepare the adjusting journal entry at December 31 to record Jacob, Inc.'s estimated bad debts assuming that the company uses the aging of accounts receivable method. What is the net realizable value of accounts receivable on the December 31 balance sheet? b. c.

Answer 1

WORKING NOTES: 1
		CALCULATION OF PROVISION OF ALLOWANCES FOR THE YEAR END
		Age Group	Amount	%	Expense Value
		Under 30 Days	$               3,58,900	1.50%	$                5,384
		30-90 Days	$               1,34,000	3.00%	$                4,020
		91-180 Days	$                  96,000	7.00%	$                6,720
		181-360 Days	$                  22,700	20.00%	$                4,540
		Over 360 Days	$                     4,350	60.00%	$                2,610
					$              23,274
WORKING NOTES: 2
		Allowance for Doubtfull Debts (Opening Bal.)	$                  15,800	Credit
		Less : bad debt write off	$                     7,500	Debit
		Balance in allowance for dobtfull debt after write off	$                     8,300	Credit
		Estimated Provision for the Allowance of Bad debts at year end=	$                  23,274	Credit
		Bad debt expenses recoded at end of year ( $ 23,274 - 8,300)	$                  14,974	Credit
		So we can show the bad debts expenses at end of year	$                  14,974
SOLUTION : A & B
	Journal Entries
	Date	Account Title and explanation	Debit	Credit
		Allowance for Doubtful Accounts	$                     7,500
	A	Account Receivable		$                       7,500
	B	Bad Debt Expenses	$                  14,974
		Allowance for Doubtful Accounts		$                     14,974
SOLUTION : C
		ACCOUNT RECEIVABLE AS ON DECEMBER 31
		Trade Account Receivable	$               6,23,450
		Less: Write off	$                     7,500
		Balance after write off	$               6,15,950
		Less: Allowance for Doubtful Accounts	$                  23,274
		Net Realizable Value	$               5,92,677
		Answer = $ 592,677