Allowance method entries The following transactions were completed by Wild Trout

Question

Allowance method entries

The following transactions were completed by Wild Trout Gallery during the current fiscal year ended December 31:

Required:

1. Record the January 1 credit balance of $37,700 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.

2. a. Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $910,800 balance in accounts receivable reflects the adjustments made during the year.

2. b. Post each entry that affects the following T accounts and determine the new balances:

3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$

4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of ½ of 1% of the sales of $5,620,000 for the year, determine the following:

a. Bad debt expense for the year.
$

b. Balance in the allowance account after the adjustment of December 31.
$

c. Expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$

Jan. 19. Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalize the receipt of $1,795 cash in full payment of Arlene’s account. Apr. 3. Wrote off the $10,290 balance owed by Premier GS Co., which is bankrupt. July 16. Received 35% of the $18,500 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible. Nov. 23. Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $2,925 cash in full payment. Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $7,735 ; Fogle Co., $2,300 ; Lake Furniture, $ 5,905 ; Melinda Shryer, $1,670. Dec. 31. Based on an analysis of the $910,800 of accounts receivable, it was estimated that $39,600 will be uncollectible. Journalize the adjusting entry.

Explanation / Answer

Answers

Date

Accounts title

Debit

Credit

Jan. 19-reinstate

Accounts Receivable-Arlene Gurley

$                                 1,795.00

Allowance for Doubtful Accounts

$                              1,795.00

Jan. 19-collection

Cash

$                                 1,795.00

Accounts Receivable-Arlene Gurley

$                              1,795.00

Apr. 3

Allowance for Doubtful Accounts

$                               10,290.00

Accounts Receivable-Premier GS Co.

$                            10,290.00

Jul-16

Cash

$                                 6,475.00

Allowance for Doubtful Accounts

$                               12,025.00

Accounts Receivable-Hayden Co.

$                            18,500.00

Nov. 23-reinstate

Accounts Receivable-Harry Carr

$                                 2,925.00

Allowance for Doubtful Accounts

$                              2,925.00

Nov. 23-collection

Cash

$                                 2,925.00

Accounts Receivable-Harry Carr

$                              2,925.00

Dec. 31-write-off

Allowance for Doubtful Accounts

$                               17,610.00

Accounts Receivable-Cavey Co.

$                              7,735.00

Accounts Receivable-Fogle Co.

$                              2,300.00

Accounts Receivable-Lake Furniture

$                              5,905.00

Accounts Receivable-Melinda Shryer

$                              1,670.00

Dec. 31-adjusting

Bad Debt Expense

$                               39,600.00

Allowance for Doubtful Accounts

$                            39,600.00

Allowance for Doubtful Accounts

Apr. 3

$                        10,290.00

Jan. 1 Balance

$                            37,700.00

Jul-16

$                        12,025.00

Jan. 19

$                              1,795.00

Dec. 31

$                        17,610.00

Nov. 23

$                              2,925.00

Dec. 31 Unadjusted Balance

$                              2,495.00 [37700 + 1795 +2925 – 10290 – 12025 – 17610]

Dec. 31 Adjusting Entry

$                            37,105.00

Dec. 31 Adjusted Balance

$                            39,600.00

Bad Debt Expense

Dec. 31 Adjusting Entry

$                        37,105.00

Dec. 31 Adjusted Balance

$                            37,105.00

Accounts receivables

$                    9,10,800.00

Less: Allowance for Doubtful Accounts

$                        39,600.00

Net Realizable Value of Accounts receivables

$                    8,71,200.00

Sales

$                  56,20,000.00

1% of above

$                        56,200.00

Bad Debt expense 50% of above

$                        28,100.00

Dec. 31 Unadjusted Balance of Allowance for Doubtful account [as calculated in T Account above]

$                          2,495.00

Dec 31 Adjusting Entry for Bad debt expense

$                        28,100.00 [as above]

Dec. 31 Adjusted Balance

$                        30,595.00

Accounts receivables

$                    9,10,800.00

Less: Allowance for Doubtful Accounts

$                        30,595.00

Net Realizable Value of Accounts receivables

$                    8,80,205.00

Date

Accounts title

Debit

Credit

Jan. 19-reinstate

Accounts Receivable-Arlene Gurley

$                                 1,795.00

Allowance for Doubtful Accounts

$                              1,795.00

Jan. 19-collection

Cash

$                                 1,795.00

Accounts Receivable-Arlene Gurley

$                              1,795.00

Apr. 3

Allowance for Doubtful Accounts

$                               10,290.00

Accounts Receivable-Premier GS Co.

$                            10,290.00

Jul-16

Cash

$                                 6,475.00

Allowance for Doubtful Accounts

$                               12,025.00

Accounts Receivable-Hayden Co.

$                            18,500.00

Nov. 23-reinstate

Accounts Receivable-Harry Carr

$                                 2,925.00

Allowance for Doubtful Accounts

$                              2,925.00

Nov. 23-collection

Cash

$                                 2,925.00

Accounts Receivable-Harry Carr

$                              2,925.00

Dec. 31-write-off

Allowance for Doubtful Accounts

$                               17,610.00

Accounts Receivable-Cavey Co.

$                              7,735.00

Accounts Receivable-Fogle Co.

$                              2,300.00

Accounts Receivable-Lake Furniture

$                              5,905.00

Accounts Receivable-Melinda Shryer

$                              1,670.00

Dec. 31-adjusting

Bad Debt Expense

$                               39,600.00

Allowance for Doubtful Accounts

$                            39,600.00

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