Question

Please help in finding and/or coming to the correct formulas/numbers to plug in beginning from Requirement Part 2(b) to Requirement 3. Everything that has a number of 22,222 needs to be replaced.

The following information will be useful.

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2020 balance sheet disclosed the following:

Current assets:

Receivables, net of allowance for uncollectible accounts of $30,000 $432,000

During 2021, credit sales were $1,750,000, cash collections from customers $1,830,000, and $35,000 in accounts receivable were written off. In addition, $3,000 was collected from a customer whose account was written off in 2020. An aging of accounts receivable at December 31, 2021, reveals the following:

Age Group	Percentage of Year-End Receivables in Group	Percent Uncollectible
0–60 days	65%	4%
61–90 days	20	15
91–120 days	10	25
Over 120 day	5	40

Required:

1) Prepare summary journal entries to account for the 2021 write-offs and the collection of the receivable previously written off. DONE

2) Prepare the year-end adjusting entry for bad debts according to each of the following situations:

(a) Bad debt expense is estimated to be 3% of credit sales for the year. DONE

(b) Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. HELP

(c) Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable. PARTIAL HELP

3) For situations (a)–(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet? HELP

RAINTREE COSMETIC COMPANY General Journal Credit Account Debit Requirement 1: To record accounts receivable written off during the year 2021: Allowance for uncollectible accounts Accounts receivable 35,000 35,000 «- Correct! To record collection of account receivable previously written off: Accounts receivable Allowance for uncollectible accounts 3,000 200 3,000 «- Correct! 3,000 Cash Accounts receivable 3,000 «- Correct! Credit Requirement 2(a): Account Bad debt expense Allowance for uncollectible accounts Debit 52,500 52,500 <- Correct! $ Requirement 2(b): Accounts receivable analysis: Beginning balance Add: Credit sales Less: Write-offs Less: Cash collections Ending balance 22,222 22,222 22,222 22,222 22,222 $ Required allowance for uncollectible accounts 22,222 Try again! $ 22,222 22,222 Allowance for uncollectible accounts analysis: Beginning balance Add: Collection of receivable previously written off Less: Write-offs Balance before adjustments Required allowance (determined above) Bad debt expense adjustment 22.222 22.222 22.222 22,222 Try again! Credit Account Bad debt expense Allowance for uncollectible accounts Debit 22,222 22,222 <- Try again!

Answer 1

Raintree Cosmetic Company Journal entries Date Account Allowance for uncollectible accounts Accounts Receivable Credit Calculation Debit $ 35,000 Req1 $ 35,000 $ 3,000 Accounts Receivable Allowance for uncollectible accounts $ 3,000 $ 3,000 Cash Accounts Receivable $ 3,000 Req 2a $ 52,500 =1,750,000*3% Bad debts expense Allowance for uncollectible accounts $ 52,500 =432,000+30,000 Reg 2b Accounts Receivable analysis Beginning balance Add Credit sales Less Write offs Less Cash collections Ending balance $ 462,000 $ 1,750,000 $ (35,000) $(1,830,000) $ 347,000 Reqd Allowance for uncollectible accts $ 34,700 =347,000*10% Allowance for uncollectible accounts analysis Beginning balance $ 30,000 Add Collection of rec previously written off $ 3,000 Less Write offs $ (35,000) Balance before adjustments $ (2,000) Required Allowance (above) $ 34,700 Bad debts expense adjustment $ 36,700 =34,700+2,000 $ 36,700 Bad debts expense Allowance for uncollectible accounts $ 36,700

Raintree Cosmetic Company Req 2c Age group 0-60 days 61-90 days 91-120 days Over 120 days Totals % of YE Rec Amount 65% $ 225,550 20% $ 69,400 10% $ 34,700 5% $ 17,350 $ 347,000 % Uncollectible Estd Allowance 4% $ 9,022 15% $ 10,410 25% $ 8,675 40% 6,940 35,047 Add Less Allowance for uncollectible accounts analysis Beginning balance $ 30,000 Collection of rec previously written off $ 3,000 Write offs $ (35,000) Balance before adjustments $ (2,000) Required Allowance (above) $ 35,047 Bad debts expense adjustment $ 37,047 =35,047+2,000 $ 37,047 Bad debts expense Allowance for uncollectible accounts $ 37,047 Req3 Calculation Allowance =52,500-2,000 Accounts Receivable Allowance Net Amount 347,000 50,500 296,500 347,000 34,700 312,300 347,000 35,047 311,953