Option #1: The Aging Method: The Smith Company Case The following was taken from

Question

Option #1: The Aging Method: The Smith Company Case

The following was taken from the records of Smith Company in the year ending December 31, 2014. Journalize the following transactions in an Excel spreadsheet for year-end 2014 using the aging method. Assume that the allowance for doubtful accounts has a beginning credit balance of $18,000 on January 1, 2014.

Assignment Template attached below

Label the events below as journal entries #1 to #4, along with the dates of the entries:

February 20, 2014: Wrote off Jones account: $7,250.

May 20, 2014: Received $4,050 as partial payment on the $8,000 account receivable due from Garcia.

August 10, 2014: Received $7,250 from Jones on the account written off on February 20, 2014.

September 15: Wrote off the individual account receivables for the following customers as payment not expected in future: Tang: $4,400; Mulaka: $2,210; Quan: $1,375.

December 31, 2014: Smith Company prepared the following aging schedule for it accounts receivables:

$160,000 of Accounts Receivable (A/R) are 0-30 days late: 3% probability of not being paid.

$40,000 of A/R are 31-60 days late: 10% probability of not being paid.

$18,000 of A/R are 61-90 days late: 20% probability of not being paid.

$1,500 of A/R are later than 90 days late: 50% probability of not being paid.

Instructions:

Submit the following items in an Excel spreadsheet, labeling each as 1, 2, 3, and 4:

The four journal entries (1 to 4 above) with a one-sentence description for each

The allowance for doubtful accounts T-account

The journal entry to record bad debt expense

The balance sheet presentation of net realizable value, including gross accounts receivables of $219,500

Option #1- Mod 6- Receivables Students Template Smith Company- December 31, 2014 Question 1: Journal# Date Account Title Debit Credit 1 1-Feb Allowance for doutful accounts    Jones- Accounts receivable 2 2-May Cash Allowance for doutful accounts    Garcia- Accounts receivable 3 10-Aug Jones- Accounts receivable    Allowance for doutful accounts Cash Jones- Accounts receivable 4 15-Sep Allowance for doutful accounts    Tang- Accounts receivable    Mulaka- Accounts receivable    Quan- Accounts receivable December 31,14-Aging of the Accounts Receivables Allowance Days late Amount %Not Paid Ending Balance 0 to 30 31-60 61-90 90days+ TOTAL Question 2: Dates T-Account Allowanace Debit Credit BB 1-Feb 20-May 10-Aug 15-Sep Bad Debt Expense= EB= Aging Result Question 3: Date Account Title 31-Dec Bad Debt Expense Allowance for doutful accounts Question 4: Balance Sheet Presentaion Gross Accounts Receivables Ending Blance of Allowance for Doubtbul Accounts Net Realizable Balance

Explanation / Answer

ion #1- Mod 6- Receivables Students Template Smith Company- December 31, 2014 Question 1: Journal# Date Account Title Debit Credit 1 1-Feb Allowance for doutful accounts 7250    Jones- Accounts receivable 7250 2 2-May Cash 4050 Allowance for doutful accounts 3950    Garcia- Accounts receivable 8000 3 10-Aug Jones- Accounts receivable 7250    Allowance for doutful accounts 7250 Cash 7250 Jones- Accounts receivable 7250 4 15-Sep Allowance for doutful accounts 7985    Tang- Accounts receivable 4400    Mulaka- Accounts receivable 2210    Quan- Accounts receivable 1375 December 31,14-Ageing of the Accounts Receivables Days late Amount %Not Paid Allowance Ending Balance 0 to 30 160000 3% 4800 155200 31-60 40000 10% 4000 36000 61-90 18000 20% 3600 14400 90 days+ 1500 50% 750 750 TOTAL 219500 13150 206350 Question 2: Dates T-Account Allowance Balance Debit Credit Debit Credit BB 18000 1-Feb 7250 10750 20-May 3950 6800 10-Aug 7250 14050 15-Sep 7985 6065 Bad Debt Expense= 7085 13150 EB= Aging Result = 13150 Question 3: Date Account Title 31-Dec Bad Debt Expense 7085 Allowance for doutful accounts 7085 Question 4: Balance Sheet Presentaion Gross Accounts Receivables 219500 Ending Blance of Allowance for Doubtbul Accounts 13150 Net Realizable Balance 206350

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