On December 31, 2011, Hurly Co. performed environmental consulting services for

Question

On December 31, 2011, Hurly Co. performed environmental consulting services for Cascade Co. Cascade was short of cash, and Hurly Co. agreed to accept a $282,700 zero-interest-bearing note due December 31, 2013, as payment in full. Cascade is somewhat of a credit risk and typically borrows funds at a rate of 11%. Hurly is much more creditworthy and has various lines of credit at 6%. (Round present value factor calculations to 5 decimal places, e.g. 1.25124 and the final answer to 0 decimal places, E.g. $6,538. Credit account titles are automatically indented when the amount is entered. Do not indent manually.) (a) Prepare the journal entry to record the transaction of December 31, 2011, for the Hurly Co

Explanation / Answer

Allowance for Doubtful Accounts 13,000 Accounts Receivable 13,000 je for the write off of accounts Accounts Receivable 1100 Allowance for Doubtful Accts 1,100 je for the write on of accounts wriitten off collected Cash 1100 Accounts Receivable 1100 je to collect cash from accounts written off now collected The balance in the allowance account is now 15,000 - 13,000 + 1,100 = 3100. The aging says 19,000 so we need an adjustment of 19000-3100 = 15,900 Bad Debt Expense 15,900 Allowance for Doubtful Accounts 15,900 #2 - They are using the % of sales method so Bad Debt Expense 8000 Allowance for doubtful Accounts 8000 that is 2% of 400,000 for the estimate of bad debts Allowance for Doubtful Accounts 1,100 Accounts Receivable 1,100 to write off the A/R Accounts Receivable 1,100 Allowance for Doubtful Accounts 1,100 to put the account back on Cash 1,100 Accounts Receivable 1,100 the customer paid the account

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