Pachel Corporation reports the following information pertaining to its accounts receivable: Days Past Due Current...
|
Pachel Corporation reports the following information pertaining to its accounts receivable: |
| Days Past Due | ||||
| Current | 1–30 | 31–60 | 61–90 | Over 90 |
| $ 60,000 | $ 40,000 | $ 25,000 | $ 12,000 | $ 2,000 |
|
The company's credit department provided the following estimates regarding the percent of accounts expected to eventually be written off from each category listed above: |
| Current receivables outstanding | 2 | % |
| Receivables 1–30 days past due | 4 | |
| Receivables 31–60 days past due | 16 | |
| Receivables 61–90 days past due | 40 | |
| Receivables over 90 days past due | 90 | |
| The company uses a statement of financial position approach to estimate credit losses. |
| a. |
Record the company's impairment loss of receivable, assuming it has a $1,400 credit balance in its Allowance for Impairment prior to making the necessary adjustment. (Omit the "$" sign in your response.) |
| General Journal | Debit | Credit |
| (Click to select)Accounts receivableMarketable securitiesCashGain on sale of investmentsAccounts payableLoss on sale of investmentsAllowance for ImpairmentImpairment loss of receivable | ||
| (Click to select)Loss on sale of investmentsAccounts receivableImpairment loss of receivableGain on sale of investmentsCashMarketable securitiesAccounts payableAllowance for Impairment | ||
| b. |
Record the company's impairment loss of receivable, assuming it has a $1,600 debit balance in its Allowance for Impairment prior to making the necessary adjustment. (Omit the "$" sign in your response.) |
| General Journal | Debit | Credit |
| (Click to select)Marketable securitiesImpairment loss of receivableGain on sale of investmentsCashAccounts receivableLoss on sale of investmentsAllowance for ImpairmentAccounts payable | ||
| (Click to select)Allowance for ImpairmentAccounts payableGain on sale of investmentsAccounts receivableLoss on sale of investmentsImpairment loss of receivableCashMarketable securities | ||
Homework Answers
| Current Receivables outstanding | $60,000 | 2% | $1,200 |
| Receivables 1-30 days past due | $40,000 | 4% | $1,600 |
| Receivables 31-60 days past due | $25,000 | 16% | $4,000 |
| Receivables 61-90 days past due | $12,000 | 40% | $4,800 |
| Receivables Over 90 days past due | $2,000 | 90% | $1,800 |
| Ending Balance Allowance for Impairment | $13,400 |
(a) Bad Debt Expense/ Loss on impairment = $13400 - 1400 = $12000
Bad Debt expense Dr. 12,000
To allowance for impairment 12,000
(b) Bad Debt Expense/ Loss on impairment = $13400 + 1600 = $15000
Bad Debt expense Dr. 15,000
To allowance for impairment 15,000
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