Entries Related to Uncollectible Accounts The following transactions were comple

Question

Entries Related to Uncollectible Accounts

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

Required:

1. Record the January 1 credit balance of $55,900 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.

2. a. Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,350,100 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 $8,340,000 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. Journalized the receipt of $2,660 cash in full payment of Arlene’s account. Apr. 3. Wrote off the $15,240 balance owed by Premier GS Co., which is bankrupt. July 16. Received 25% of the $27,300 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 $4,335 cash in full payment. Dec. 31. Wrote off the following accounts as uncollectible (one entry): Cavey Co.,$11,465; Fogle Co., $3,405; Lake Furniture, $8,750; Melinda Shryer, $2,475. Dec. 31. Based on an analysis of the $1,350,100 of accounts receivable, it was estimated that $58,700 will be uncollectible. Journalized the adjusting entry.

Explanation / Answer

2-a.

2.b:

3. Expected NRV of AR= Book value- allowance for uncollectibel accounts= 1350100-58700= 1291400

4.

a.

b.

c. NRV of AR= 1350100-42605= 1307495

Entry Account Debit Credit Jan. 19-reinstate Accounts receivable 2660 Allowance for uncollectible account 2660 [Entry for recording written off accounts collected during the year] Jan. 19-collection Cash 2660 Accounts receivable 2660 [Entry for recording written off accounts collected during the year] Apr. 3 Allowance for uncollectible account 15420 Accounts receivable 15420 [Entry for recording accounts written off during the year] 16-Jul Cash 6825 Allowance for uncollectible account 20475 Accounts receivable 27300 Received 25% of the $27,300 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible. Nov. 23-reinstate Accounts receivable 4335 Allowance for uncollectible account 4335 [Entry for recording written off accounts collected during the year] Nov. 23-collection Cash 4335 Accounts receivable 4335 [Entry for recording written off accounts collected during the year] Dec. 31-write-off Allowance for uncollectible account 26095 Accounts receivable 26095 [Entry for recording accounts written off during the year] Dec. 31-adjusting Bad debt expense 57795 Allowance for uncollectible account 57795 [Entry for recording bad debt expense for the year]

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