Question

Brief Exercise 5-45 Aging Method Spotted Singer sells karaoke machines to businesses and consumers via the Internet. On January 1, 2019, Spotted Singer Inc. has an Accounts Receivable balance of $997,000 and a credit balance in its Allowance for Doubtful Accounts of $24,000. During 2019, Spotted Singer had $10,800,000 of credit sales, collected $1,725,000 of accounts receivable, and had customer defaults of $45,000. At year end, an aging analysis indicates that $28,000 of Spotted Singer's receivables will be uncollectible. Required: 1. Calculate Spotted Singer's balance in accounts receivable on December 31, 2019, prior to the adjustment. $ 2. Calculate Spotted Singer's balance in allowance for doubtful unts on cem! 31, 2019, prior to adjustment. 3. Prepare the necessary adjusting entry for 2019.

Answer 1

1. Balance in Accounts receivable on Dec 31, 2019, prior to the adjustment:

Particulars	Amount
Opening Balance	$       9,97,000.00
Add: Credit Sales during the year	$ 1,08,00,000.00
Less: Collections during the year	$     17,25,000.00
Less: Customer Defaults/Bad debts in excess of allowance for doubtful debts (45000-24000)	$           21,000.00
	$ 1,00,51,000.00

2. Balance in Allowance for doubtful accounts on Dec 31, 2019, prior to the adjustment:

Particulars	Amount
Opening Balance	$ 24,000.00
Less: Customer Defaults during the year	$ 24,000.00
	$                -

3. Adjusting Entry:

Bad debt Expense A/c $ 28,000

To Allowance for Doubtful Accounts A/c $ 28,000

(Being adjusting entry made at year end 2019)