Question

P8-29A Accounting for uncollectible accounts using the allowance method (aging-of-receivables) and reporting receivables on the balance sheet Learning Objectives 1, 3 2. Allowance CR Bal. $8,482 at At September 30, 2018, the accounts of Green Terrace Medical Center (GTMC) include the following: Dec. 31, 2018 $ 145,000 Accounts Receivable Allowance for Bad Debts (credit balance) 3,500 During the last quarter of 2018, GTMC completed the following selected transactions: Sales on account, $450,000. Ignore Cost of Goods Sold. Collections on account, $427,100 Wrote off accounts receivable as uncollectible: Regan, Co., $1,400; Owen Reis, $800; and Patterson, Inc., $700 Recorded bad debts expense based on the aging of accounts receivable, as follows: Age of Accounts 1-30 Days 31-60 61-90 Over 90 Days Days Days $ 104,000 $ 39,000 $ 14,000 $ 8,000 Accounts Receivable 0.3% Estimated percent uncollectible 35% 30%
Please explain your answer. Thank you.

Answer 1

S.No. Accounts Titles Debit Credit 1 $ 450,000 Accounts Receivables Sales $ 450,000 2 $ 427,100 Cash Accounts Receivables $ 427,100 $ 2,900 Allowance for Bad Debts Accounts Receivable $ 2,900 4 $ 7,882 Bad Debt expense Allowance for Bad debts $ 7,882

Accounts Receivable Beginning balance $ 145,000 Cash $427,100 Sales $ 450,000 Allowance for bad debts $ 2,900 Ending balance $ 165,000 $595,000 $ 595,000 Allowance for Bad debts Accounts Receivables $ 2,900 Beginning balance $ 3,500 Bad debt expense Ending Balance $ $ 8,482 11,382 $ 11,382 Activate W

Working Notes: Bad debt expense Age Balance Estimated % Uncollectable Estimated amount uncollectable 1-30 days 31-60 days 61-90 days Over 90 days Total $ $ $ $ 104,000 39,000 14,000 8,000 0.30% $ 3% $ 30% $ 35% $ $ 312 1,170 4,200 2,800 8,482 Total amount to be in Allowance for bad debts account Add : Uncollectabiles written off Less: Credit balance in Allowance for bad debts Bad debt expense $ $ 8,482 2,900 (3,500) 7,882 Bad debts written off = $ 1400 + $ 800 + $ 700 = $ 2,900

Green Terrace Medical Center Balance sheet (partial) on December 31, 2018 Accounts Receivables Less : Allowance for bad debts Net Accounts Receivables $ $ 165,000 (8,482) $ 156,518