ACCT 201 O\'Shaughnessy FA17 Class Activity 5 Accounting for Receivables Name is

Question

ACCT 201 O'Shaughnessy FA17 Class Activity 5 Accounting for Receivables Name is the charge for using (not paying) money until a later date. 2. The be repaid. by 3. The accounts receivable turnover is calculated by dividing 4 The method of accounting for bad debts records the loss from an lectible (and not uncollectible account receivable at the time it is determined to be uncol before) Writing off an uncollectible account receivable when the allowance method of accounting for uncollectible accounts is used, a company should debit S. and credit accounts receivable. 6. The method uses income statement relationships to estimate bad debts and is based on the idea that a given percent of a company's credit sales for a period are uncollectible A company had the following items and amounts in its unadjusted trial balance as of December 31 of the current year: 7. Debit Credit Cash sales Credit sales Accounts receivable Allowance for doubtful accounts S 225,000 650,000 $85,000 1,500 Prepare the adjusting entry to estimate bad debts under each of the following separate situations. a. Bad debts are estimated to be 2.5% of credit sales. b. An aging analysis estimates that 8% of the outstanding accounts receivable will be uncollectible. Debit Credit b.

Explanation / Answer

1. Interest Expense

2. Maturity date

3. Dividing Net creit sales / Average accounts receivable

4. Bad debts direct write off method

5. Debit Allowance for Doubtful Debts.

6. Percentage of Credit Sales method

7.

A. Journal Entries DR IN $ CR IN $ Bad debts expense Dr. 14,750 Allowance for doubtful debts Cr. 14,750 (2.5% of credit sales i.e. 650,000 less Allowance already created i.e. 1500) B. Journal Entries DR IN $ CR IN $ Bad debts expense Dr. 5,300 Allowance for doubtful debts Cr. 5,300 (8% of outstanding account rec. i.e. 85000 Less Aloowance already created i.e. 1500)

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