Question

Chapter 8 Practice Problems Problem #7 - Analysis of Accounts Receivable Method At the end of the current year, Accounts Receivable has a balance of $6,000,000: Allowance for Doubtful Accounts has a debit balance of $50,000; and Net Sales for the year total $18,000,000. Using the Analysis of Accounts Receivable Method the balance for the Allowance for Doubtful Accounts is estimated as $125,000. 1) Calculate the dollar amount required to record the allowance amount. 2) Prepare the adjusting journal entry for the Allowance for Doubtful Accounts: Date Accounts Dr Cr 3) Calculate the Net Accounts Receivable Balance Problem #8 - Analysis of Accounts Receivable Method At the end of the current year, Accounts Receivable has a balance of $400,000: Allowance for Doubtful Accounts has a debit balance of $1,800; and Net Sales for the year total $6,000,000. Using the Analysis of Accounts Receivable Method the balance for the Allowance for Doubtful Accounts is estimated as $80,000, 1) Calculate the dollar amount required to record the allowance amount. 2) Prepare the adjusting journal entry for the Allowance for Doubtful Accounts: Date Accounts Dr Cr 3) Calculate the Net Accounts Receivable Balance

Answer 1

Answer to Problem#7: Analysis of Accounts Receivable Method: Sub Part (1): Calculation of the Dollar amount required to record the allowance amount: Under otherthan Percentage of Sales method, we need to specifically adjust the debit balance in Allowance for Doubtful Accounts before making. So, Calculation as follows Estimated Doubtful Accounts Balance $ 125,000.00 Add: Debit Balance in Allowance for Doubtful Accounts $ 50,000.00 Amount Required to record Allowance amount $175,000.00 Sub Part (2): Preparation of Adjusting Journal Entry for the Allowance for Doubtful Accounts: The Adjusting entry for the Allowance for Doubtful Accounts is as follows Journal Entries Date Account Title and Explaination Debit Post. Ref. Credit $ $ $ 175,000.00 $ 175,000.00 Bad Debts Expense Allowance for Doubtful Accounts (To record adjusting entry for estimated bad debts expense)

Sub Part (3): Calculation of the Net Accounts Receivable Balance: Accounts Receivable Balance $ 6,000,000.00 Less: Allowance for Doubtful Accounts (50,000.00) Add: Adjustment for Estimated Uncollectibles $ 175,000.00 $ (125,000.00) Net Accounts Receivable $ 5,875,000.00 $

Answer to Problem#8: Analysis of Accounts Receivable Method: Sub Part (1): Calculation of the Dollar amount required to record the allowance amount: Under otherthan Percentage of Sales method, we need to specifically adjust the debit balance in Allowance for Doubtful Accounts before making. So, Calculation as follows Estimated Doubtful Accounts Balance $ 80,000.00 Add: Debit Balance in Allowance for Doubtful Accounts $ 1,800.00 Amount Required to record Allowance amount $81,800.00 Sub Part (2): Preparation of Adjusting Journal Entry for the Allowance for Doubtful Accounts: The Adjusting entry for the Allowance for Doubtful Accounts is as follows Journal Entries Date Account Title and Explaination Post. Ref. Debit $ Credit $ $ 81,800.00 $ 81,800.00 Bad Debts Expense Allowance for Doubtful Accounts (To record adjusting entry for estimated bad debts expense)

Sub Part (3): Calculation of the Net Accounts Receivable Balance: Accounts Receivable Balance $ 400,000.00 Less: Allowance for Doubtful Accounts $ (1,800.00) Add: Adjustment for Estimated Uncollectibles $ 81,800.00 $ (80,000.00) Net Accounts Receivable $ 320,000.00