The following are a series of unrelated situations.
Answer the questions relating to each of the five independent
situations as requested.
1. Swifty Company’s unadjusted trial balance at
December 31, 2020, included the following accounts.
Debit |
Credit |
|||
Accounts receivable | $53,300 | |||
Allowance for doubtful accounts | 4,950 | |||
Net sales | $1,232,500 |
Swifty Company estimates its bad debt expense to be 6% of gross
accounts receivable. Determine its bad debt expense for 2020.
Bad debt expense for 2020 |
$ ___________ |
2. An analysis and aging of Nash Corp. accounts
receivable at December 31, 2020, disclosed the following.
Amounts estimated to be uncollectible | $ 182,300 | |
Accounts receivable | 1,786,000 | |
Allowance for doubtful accounts (per books) | 126,040 |
What is the net amount expected to be collected of Nash’s
receivables at December 31, 2020?
Net realizable value |
$ ____________ |
3. Crane Co. provides for doubtful accounts based
on 2% of gross accounts receivable, The following data are
available for 2020.
Credit sales during 2020 | $3,912,600 | |
Bad debt expense | 57,110 | |
Allowance for doubtful accounts 1/1/20 | 16,250 | |
Collection of accounts written off in prior years (customer credit was reestablished) | 8,520 | |
Customer accounts written off as uncollectible during 2020 | 28,190 |
What is the balance in Allowance for Doubtful Accounts at December
31, 2020?
Allowance for doubtful accounts 12/31/20 |
$ ___________ |
4. At the end of its first year of operations,
December 31, 2020, Cheyenne Inc. reported the following
information.
Accounts receivable, net of allowance for doubtful accounts | $867,500 | |
Customer accounts written off as uncollectible during 2020 | 24,140 | |
Bad debt expense for 2020 | 90,280 |
What should be the balance in accounts receivable at December 31,
2020, before subtracting the allowance for doubtful accounts?
Accounts receivable, before deducting allowance for doubtful accounts |
$ __________ |
5. The following accounts were taken from Ayayai
Inc.’s trial balance at December 31, 2020.
Debit |
Credit |
|||
Net credit sales | $730,700 | |||
Allowance for doubtful accounts | $15,060 | |||
Accounts receivable | 317,800 |
If doubtful accounts are 3% of accounts receivable, determine the
bad debt expense to be reported for 2020.
Bad debt expense, as adjusted |
$___________ |
Solution
Determination of the bad debts expense to be reported for 2020:
Bad debts expense = 6% of accounts receivable
Accounts receivable = $53,300
Bad debts expense = 6% x 53,300 = $3,198
Add: Allowance for doubtful accounts, Debit balance = $4,950
Bad debts expense, 2020 = $8,148
Determination of the net amount expected to be collected of receivables at December 31, 2020:
Accounts receivable, net = accounts receivable – amounts estimated to be uncollectible
Accounts receivable = $1,786,000
Amounts estimated to be uncollectible = $182,300
Accounts receivable, net = 1,786,000 – 182,300 = $1,603,700
Hence, net accounts receivables at December 31, 2020 = $1,603,700
Determination of the allowance for doubtful accounts, December 31, 2020:
Balance in allowance for doubtful accounts, December 31, 2020 = beginning allowance balance + bad debts expense – write offs + collected write offs
Beginning allowance balance = $16,250
Bad debts expense = $57,110
Write offs = $28,190
Collected write offs = $8,520
Allowance for doubtful accounts, December 31, 2020 = 16,250 + 57,110 – 28,190 + 8,520 = $53,690
Determination of the balance in accounts receivable at December 31, 2020 before subtracting the allowance for doubtful accounts:
Accounts receivable, before deducting allowance for doubtful accounts =
Net receivables balance + bad debts expense – write offs
Net receivables balance = $867,500
Bad debts expense = $90,280
Write offs = $24,140
Accounts receivable, before deducting allowance for doubtful accounts = 867,500 + 90,280 – 24,140 = $933,640
Determination of bad debts expense to be reported for 2020, assuming doubtful accounts = 3% of accounts receivable:
Assuming, accounts receivable does not reflect the period’s credit sales,
Bad debts expense for 2020 = 3% x (317,800 + 730,700) – 15,060
Bad debts expense, 2020 = 31,455 – 15,060 = $16,395
Bad debts expense, 2020 = $16,395
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