Question

M- Requires Respondus LockDown Browser Time Left 1:29-28 Kalie Carey: Attempt 1 question 38 (14 points) Please click on Full Screen: Black and Gold Company had a $ 800 credit balance in Allowance for Doubtful Accounts at December 31, 2016, before the current year's provision for uncollectible accounts. An aging of the accounts receivable subsidiary ledger revealed that 4 % of total accounts receivable of $155,000 are estimated to be uncollectible at the end of the year. (a) Prepare the adjusting entry on December 31, 2016, to recognize bad debts expense Show calculations. (b) Assume the same facts as above except that the Allowance for Doubtful Accounts account had a $900 debit balance before the current year's provision for uncollectible accounts. Prepare the adjusting entry for the current year's provision for uncollectible accounts. Show calculations 15 18 Assume that the company has a policy of providing for bad debts at the rate of 1% of sales, that sales for 2010 were $550,000, and that Allowance for Doubtful Accounts had a $650 credit balance before adjustment. Prepare the adjusting entry for the current year's provision for bad debts. 24 ld): What is the net realizable value of the Accounts Receivable at 12/31/16 after making the adjusting entry in part (a) above. Show calculations MacBook Air 888 r 9 6 5 3 2

Answer 1

a. Bad debts expense = 4% of Total accounts receivable

= 4% of $155,000

= $6,200.00

There is already a provision for $800, therefore, the provision will be done for the difference amount i.e.$5,400 ($6,200 - $800) .

Date	General Journal	Debit	Credit
Dec. 31, 2016	Bad Debts Expense	$5,400
	Allowance for Doubtful Accounts		$5,400
	(Being Bad Debts expense recorded.)

Bad debts expense is debited to record the expense whereas, Allowance for Doubtful accounts has been credited to increase the provision with the current year's amount.

b. Debit balance in Allowance for Doubtful Accounts = $900

Debit balance indicates that there has been a short provision in the past. So, the current year's provision will be increased by this amount to balance the same.

Total un-collectible amount = $6,200 (as calculated above)

Therefore, total provision to be made = $6,200 + $900

= $7,100.

Date	General Journal	Debit	Credit
Dec. 31, 2016	Bad Debts Expense	$7,100
	Allowance for Doubtful Accounts		$7,100
	(Being Bad Debts expense recorded.)

c. Balance in Allowance for Doubtful Accounts = $650.

Current year's provision = 1% of sales

= 1% of $550,000.

= $5,500.

Date	General Journal	Debit	Credit
Dec. 31, 2010	Bad Debts Expense	$5,500
	Allowance for Doubtful Accounts		$5,500
	(Being Bad Debts expense recorded.)

d. Net Realizable value of the accounts receivable at 12/31/16 in (a) above = Total Accounts Receivable - Total balance in Allowance for Doubtful Accounts

= $155,000 - $6,200

= $148,800.