Question

Thank you so much.

TravelToday, Inc., disclosed the following rounded amounts (in thousands) concerning the Allowance for Doubtful Accounts on its Form 10-K annual report. Allowance for Doubtful Accounts dollars in thousands andsecreab ofs 10,0000 Beginning Balance Increases for Bad Debt Expense Decreases for Write-0ffs Ending Balance $ 1,700 Year 2016 2015 2014 $ 10,000 9,000 13,500 4,500 5,100 1,400 4,100 5,900 9,000 Required 1-a. Prepare a T-account for the Allowance for Doubtful Accounts and enter Into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance 2. Record summary Journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off 3. Supply the missing Information for 2016 1-b. Write the T-account In equation format to prove the above items account for the changes in the account. specific customer account balances. 4. If TravelToday had written off an additional $40 of Accounts Recelvable during 2016, by how much would Net Recelvables have decreased? How much would Net Income have decreased?

Answer 1

Solution 1-a:

Allowance for Doubtful Accounts (2014)
Beg. Bal.		13500
		1400	Bad debt expense
Write offs	5900
End. Bal.		9000

Solution 1-b:

Beginning balance	+	Bad debt expense	-	Write offs	=	Ending balance
13500	+	1400	-	5900	=	9000

Solution 2:

Journal entries for 2015
Transaction	General Journal	Debit	Credit
a	Bad debts expense Dr	5100
	To Allowance for Doubtful Accounts		5100
	(To record adjusting entry for bad debts)
b	Allowance for Doubtful Accounts	4100
	To Accounts Receivable		4100
	(To record adjusting entry for write offs)

Solution 3:

Allowance for Doubtful Accounts	Balance at beginning of the year	+	Additions charged to Bad debt expense	-	Write offs	=	Balance at End of the year
2016	10000	+	4500	-	12800	=	1700

Solution 4:

Decrease in Net receivables = $0

Decrease in Net Income = $0

Writing off an additional account receivable will not effect both the net receivables and net income, because it will be written off from allowance for Doubtful accounts and will be reduced from both accounts receivables and allowance for Doubtful accounts.