Allowance Method for Accounting for Bad Debts At the beginning of 2017, EZ Tech Company's Accounts...
Allowance Method for Accounting for Bad Debts
At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $147,000, and the balance in Allowance for Doubtful Accounts was $2,500. EZ Tech's sales in 2017 were $1,100,000, 70% of which were on credit. Collections on account during the year were $710,000. The company wrote off $4,000 of uncollectible accounts during the year.
Required:
1. Identify and analyze the sales during 2017.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | |||||
Identify and analyze the transactions related to the collections of cash during 2017.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | |||||
Identify and analyze the transactions related to the write-offs of accounts receivable during 2017.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign. Remember: if a contra account is
increased, it will have the effect of decreasing
the corresponding financial statement item. If a contra account is
decreased, it will have the effect of increasing
the corresponding financial statement item.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | |||||
2. Identify and analyze the adjustments to recognize bad debts assuming that (a) bad debts expense is 2% of credit sales and (b) amounts expected to be uncollectible are 7% of the year-end accounts receivable.
a. Identify and analyze the adjustments to recognize bad debts assuming that bad debts expense is 2% of credit sales.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign. Remember: if a contra account is
increased, it will have the effect of decreasing
the corresponding financial statement item. If a contra account is
decreased, it will have the effect of increasing
the corresponding financial statement item.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | |||||
b. Identify and analyze the adjustments to recognize bad debts assuming that amounts expected to be uncollectible are 7% of the year-end accounts receivable.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign. Remember: if a contra account is
increased, it will have the effect of decreasing
the corresponding financial statement item. If a contra account is
decreased, it will have the effect of increasing
the corresponding financial statement item.
| Balance Sheet | Income Statement | |||||||||||||
| Stockholders' | Net | |||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | |||||
3. What is the net realizable value of accounts receivable on December 31, 2017, under each assumption in part (2)?
Using the percentage of sales approach, the net realizable value
of the receivables is?
$
Using the percentage of year-end receivables approach, the net
realizable value of the receivables is?
$
4. The recognition of bad debts expense_________ the net realizable value by the amount recorded in bad debts expense and the_________.The write-off of accounts__________ the net realizable value.
Homework Answers
| 1 | Sales: | |
| Activity | Operating | |
| Accounts | Cash increase,Accounts receivable increase,Sales increases | |
| Statement(s) | Income statement,balance sheet and cash flow statement |
| Balance sheet | Income statement | ||||||||||||
| Assets | = | Liabilities | + | Stockholder's Equity | Revenues | - | Expenses | = | Net income | ||||
| Cash (1100000*30%) | 330000 | No entry | 0 | 1100000 | Sales | 1100000 | No entry | 0 | 1100000 | ||||
| Accounts receivable | |||||||||||||
| (1100000*70%) | 770000 |
| Collections of cash during 2017: | |
| Activity | Operating |
| Accounts | Cash increase,Accounts receivable decrease |
| Statement(s) | Balance sheet only |
| Balance sheet | Income statement | ||||||||||||
| Assets | = | Liabilities | + | Stockholder's Equity | Revenues | - | Expenses | = | Net income | ||||
| Cash | 710000 | No entry | 0 | 0 | No entry | 0 | No entry | 0 | 0 | ||||
| Accounts receivable | -710000 |
| Write off of uncollectible accounts: | |
| Activity | NA |
| Accounts | Allowance for doubtful accounts decrease,Accounts receivable decrease |
| Statement(s) | Balance sheet only |
| Balance sheet | Income statement | ||||||||||||
| Assets | = | Liabilities | + | Stockholder's Equity | Revenues | - | Expenses | = | Net income | ||||
| Allowance for doubtful accounts | 4000 | No entry | 0 | 0 | No entry | 0 | No entry | 0 | 0 | ||||
| Accounts receivable | -4000 |
| 2 | ||
| (a) | Bad debt expense=Credit sales*2%=770000*2%=$ 15400 | |
| Activity | NA | |
| Accounts | Bad debt expense increase,Allowance for doubtful accounts increase | |
| Statement(s) | Balance sheet only |
| Balance sheet | Income statement | ||||||||||||
| Assets | = | Liabilities | + | Stockholder's Equity | Revenues | - | Expenses | = | Net income | ||||
| Allowance for doubtful accounts | -15400 | No entry | 0 | -15400 | No entry | 0 | Bad debt expense | 15400 | -15400 |
| (b) | Desired balance in allowance for doubtful accounts=Year-end accounts receivable*7% | |
| Year-end accounts receivable: | ||
| $ | ||
| Beginning balance | 147000 | |
| Add: Credit sales | 770000 | |
| 917000 | ||
| Less:Collections | 710000 | |
| Ending balance | 207000 | |
| Desired balance in allowance for doubtful accounts=207000*7%=$ 14490 | ||
| Current balance in allowance for doubtful accounts=2500-4000=-1500=$ 1500 debit | ||
| Bad debt expense to be recognized=14490+1500=$ 15990 |
| Activity | NA |
| Accounts | Bad debt expense increase,Allowance for doubtful accounts increase |
| Statement(s) | Balance sheet only |
| Balance sheet | Income statement | ||||||||||||
| Assets | = | Liabilities | + | Stockholder's Equity | Revenues | - | Expenses | = | Net income | ||||
| Allowance for doubtful accounts | -15990 | No entry | 0 | -15990 | No entry | 0 | Bad debt expense | 15990 | -15990 |
Add Answer to:
Allowance Method for Accounting for Bad Debts
At the beginning of 2017, EZ Tech Company's Accounts...
Allowance Method of Accounting for Bad Debts—Comparison of the Two Approaches Guzman Inc. had the following...
Allowance Method of Accounting for Bad Debts—Comparison of the
Two Approaches
Guzman Inc. had the following data available for 2017 (before
making any adjustments):
Accounts receivable, 12/31/17
$324,200
Allowance for doubtful accounts
2,600
Net credit sales, 2017
842,000
Required:
1. Identify and analyze the adjustment to
recognize bad debts under the following assumptions:
(a) bad debts expense is expected to be 2% of net credit sales for
the year.
Activity
Accounts
Statement(s)
How does this entry affect the accounting equation?...
Allowance Method of Accounting for Bad Debts-Comparison of the Two Approaches Romere Corp had the following...
Allowance Method of Accounting for Bad Debts-Comparison of the Two Approaches Romere Corp had the following data avable for 2017 (before making any adjustments) Accounts receivable, 12/31/17 $329,300 Allowance for doubthul accounts 2.500 Net credit sales, 2017 794,000 Required: 1. contity and analyze the adjustment to recognize bad debts under the following assumptions: (a) batetits expense is expected to be one credit for the year. Activity Accounts Statements) How does this entry affect the accounting equation of financial statement item...
Using an Aging Schedule to Account for Bad Debts Carter Company sells on credit with terms...
Using an Aging Schedule to Account for Bad Debts
Carter Company sells on credit with terms of n/30. For the
$500,000 of accounts at the end of the year that are not overdue,
there is a 90% probability of collection. For the $200,000 of
accounts that are less than a month past due, Carter estimates the
likelihood of collection going down to 70%. The probability of
collecting the $100,000 of accounts more than a month past due is
estimated to...
Depreciation On July 1, 2017, Dexter Corp. buys a computer system for $144,800 in cash. Assume...
Depreciation
On July 1, 2017, Dexter Corp. buys a computer system for
$144,800 in cash. Assume that the computer is expected to have a
four-year life and an estimated salvage value of $20,000 at the end
of that time.
Required:
1. Identify and analyze the transaction to
record the purchase of the computer on July 1, 2017.
Activity
Accounts
Statement(s)
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and...
Using an Aging Schedule to Account for Bad Debts Carter Company sells on credit wiith terms...
Using an Aging Schedule to Account for Bad Debts Carter Company sells on credit wiith terms of n/30. For the $500,000 of accounts at the end of the year that are not overdue, there is a 90 % probability of collection. For the $200,000 of ac that are less than a month past due, Carter estimates the likelihood of collection going down to 70 %. The probability of collecting the $100,000 of accounts more than a month past due is...
Asset Disposal Assume that Tsua Enterprises purchased an asset on January 1, 2015, for $60,000. The...
Asset Disposal Assume that Tsua Enterprises purchased an asset on January 1, 2015, for $60,000. The asset had an estimated life of six years and an estimated residual value of $6,000. The company used the straight-line method to depreciate the asset. Assume that Tsua Enterprises sold the asset on July 1, 2017, and received $16,000 cash and a note for an additional $14,000. Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017. Activity Accounts Statement(s)...
Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $62,000. The...
Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $62,000. The asset had an estimated life of six years and an estimated residual value of $6,200. The company used the straight-line method to depreciate the asset. On July 1, 2017, the asset was sold for $40,960 Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017 Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement...
Concert Tickets Sold in Advance The Bard produces an outdoor concert festival that runs from June...
Concert Tickets Sold in Advance The Bard produces an outdoor concert festival that runs from June 28, 2017, through July 1, 2017. Concertgoers pay $80 for a four-day pass to the festival, and all 36,000 tickets are sold out by the May 1, 2017, deadline to buy tickets. Assume that the Bard prepares adjustments at the end of each month. Required: 1. Identify and analyze the transaction on May 1, 2017, assuming that all 36,000 tickets are sold on this...
Purchase Discounts The following are transactions of Jackman, Inc. Identify and analyze each of the following...
Purchase Discounts The following are transactions of Jackman, Inc. Identify and analyze each of the following transactions of Jackman, Inc. (All purchases on credit are made with terms of 1/10, 1/30, and Jackman uses system of inventory.) July 3: Purchased merchandise on credit from Tabby Company for $6,000. Activity Operating Account Payable Increase, Purchases Increase Statement(s) Balance Sheet and Income Statement Accounts How does this entry affect the accounting equation? If a financial statement item is not affected, select "No...
Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $62,000. The...
Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $62,000. The asset had an estimated life of six years and an estimated residual value of $6,200. TI company used the straight-line method to depreciate the asset. On July 1, 2017, the asset was sold for $40,960 Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017 Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement...
Allowance Method of Accounting for Bad Debts—Comparison of the
Two Approaches
Guzman Inc. had the following data available for 2017 (before
making any adjustments):
Accounts receivable, 12/31/17
$324,200
Allowance for doubtful accounts
2,600
Net credit sales, 2017
842,000
Required:
1. Identify and analyze the adjustment to
recognize bad debts under the following assumptions:
(a) bad debts expense is expected to be 2% of net credit sales for
the year.
Activity
Accounts
Statement(s)
How does this entry affect the accounting equation?...
Allowance Method of Accounting for Bad Debts-Comparison of the Two Approaches Romere Corp had the following data avable for 2017 (before making any adjustments) Accounts receivable, 12/31/17 $329,300 Allowance for doubthul accounts 2.500 Net credit sales, 2017 794,000 Required: 1. contity and analyze the adjustment to recognize bad debts under the following assumptions: (a) batetits expense is expected to be one credit for the year. Activity Accounts Statements) How does this entry affect the accounting equation of financial statement item...
Using an Aging Schedule to Account for Bad Debts
Carter Company sells on credit with terms of n/30. For the
$500,000 of accounts at the end of the year that are not overdue,
there is a 90% probability of collection. For the $200,000 of
accounts that are less than a month past due, Carter estimates the
likelihood of collection going down to 70%. The probability of
collecting the $100,000 of accounts more than a month past due is
estimated to...
Depreciation
On July 1, 2017, Dexter Corp. buys a computer system for
$144,800 in cash. Assume that the computer is expected to have a
four-year life and an estimated salvage value of $20,000 at the end
of that time.
Required:
1. Identify and analyze the transaction to
record the purchase of the computer on July 1, 2017.
Activity
Accounts
Statement(s)
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and...
Using an Aging Schedule to Account for Bad Debts Carter Company sells on credit wiith terms of n/30. For the $500,000 of accounts at the end of the year that are not overdue, there is a 90 % probability of collection. For the $200,000 of ac that are less than a month past due, Carter estimates the likelihood of collection going down to 70 %. The probability of collecting the $100,000 of accounts more than a month past due is...
Asset Disposal Assume that Tsua Enterprises purchased an asset on January 1, 2015, for $60,000. The asset had an estimated life of six years and an estimated residual value of $6,000. The company used the straight-line method to depreciate the asset. Assume that Tsua Enterprises sold the asset on July 1, 2017, and received $16,000 cash and a note for an additional $14,000. Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017. Activity Accounts Statement(s)...
Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $62,000. The asset had an estimated life of six years and an estimated residual value of $6,200. The company used the straight-line method to depreciate the asset. On July 1, 2017, the asset was sold for $40,960 Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017 Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement...
Concert Tickets Sold in Advance The Bard produces an outdoor concert festival that runs from June 28, 2017, through July 1, 2017. Concertgoers pay $80 for a four-day pass to the festival, and all 36,000 tickets are sold out by the May 1, 2017, deadline to buy tickets. Assume that the Bard prepares adjustments at the end of each month. Required: 1. Identify and analyze the transaction on May 1, 2017, assuming that all 36,000 tickets are sold on this...
Purchase Discounts The following are transactions of Jackman, Inc. Identify and analyze each of the following transactions of Jackman, Inc. (All purchases on credit are made with terms of 1/10, 1/30, and Jackman uses system of inventory.) July 3: Purchased merchandise on credit from Tabby Company for $6,000. Activity Operating Account Payable Increase, Purchases Increase Statement(s) Balance Sheet and Income Statement Accounts How does this entry affect the accounting equation? If a financial statement item is not affected, select "No...
Asset Disposal Assume that Gonzalez Company purchased an asset on January 1, 2015, for $62,000. The asset had an estimated life of six years and an estimated residual value of $6,200. TI company used the straight-line method to depreciate the asset. On July 1, 2017, the asset was sold for $40,960 Required: 1. Identify and analyze the effect of the transaction for depreciation for 2017 Activity Accounts Statement(s) How does this entry affect the accounting equation? If a financial statement...
Most questions answered within 3 hours.
-
The average length of time between arrivals at a turnpike
toll-booth is 26 seconds. What is...
asked 1 hour ago -
(a) A piston at 6.1 atm contains a gas that occupies a volume of
3.5 L....
asked 2 hours ago -
Please answer true or false. Words
cannot be changed or added in to make it true...
asked 2 hours ago -
An empty test tube weighs 15.923 grams. Then,
MgCl2•6H2O is added into the test tube. After...
asked 2 hours ago -
Assume memory access is 10 units of time and disk access is
10000 units of time....
asked 2 hours ago -
1. Are all good samples random?
2. Magazines often report surveys giving statistics such as “63%...
asked 3 hours ago -
Under all the various types of market structures, firms
must eventually earn some economic profits for...
asked 3 hours ago -
Consider the following fitness regime for a single locus trait
with two co-dominant alleles: w11 =...
asked 3 hours ago -
A large cable company reports the following.
80% of its customers subscribe to its cable TV...
asked 3 hours ago -
Please answer the question in brief.
Discuss the role of ERP in organizations. Are ERP tools...
asked 3 hours ago -
Discuss the pros and cons of collaborative software such
as SameTime. Does it increase productivity? What...
asked 3 hours ago -
Buying your in-laws a gift because it’s expected is
due to the ____________ motive of gift-giving....
asked 3 hours ago