) Schermerhorn Co. estimates uncollectible accounts based on 4% of net credit sa
ID: 2577009 • Letter: #
Question
) Schermerhorn Co. estimates uncollectible accounts based on 4% of net credit sales during the company's fiscal year. nformation available for the current year is provided below. Allowance for uncollectible accounts, 1/1 $116,000 Collection from customers whose accounts were Customer accounts written off as uncollectible Credit sales during the current year previously written off 14,000 105,000 3,250,000 42,000 during the current year Sales returns and allowances during the current year REQUIRED: Determine the balance in the Allowance for Uncollectible Accounts at December 31st of the current year. 2) The Pacific Company lists the following accounts on its year-end trial balance: Credit 245,000 Accounts receivable Allowance for uncollectible accounts Sales Sales returns and allowances 1,600 920,000 37,500 The allowance for uncollectible accounts is estimated, at year end, at 5% of outstanding accounts receivable. (a) REQUIRED: Determine the bad debt expense reported on the year-end income statement REQUIRED: 1.5% of net sales. Determine the bad debt expense reported on the year-end income statement b) Assume the Pacific Company estimates its uncollectible accounts atExplanation / Answer
1.
Net credit sales = Credit sales - Sales retuns and allowances
= 3,250,000 - 42,000 = 3,208,000
Estimated uncollectible during the year = 4% of net credit sales
= 3,208,000 * 4% = 128,320
Balance in allowance for uncollectible account at December 31 = Allowance for uncollectible accounts, 1/1 + Collections from customers whose accounts were previously written off - Customer accounts written off as uncollectible during the current year + Estimated uncollectible during the year
= 116,000 + 14,000 - 105,000 + 128,320
= 153,320.
2) (a)
Allowance for uncollcetible during the year = 5% of outstanding Accounts Receivable
= 245,000 * 5% = 12,250
Bad debt expense reported on the year end income statement = Allowance for uncollcetible during the year - Balance in allowance for uncollectible accounts
= 12,250 - 1,600
= 10,650.
2) (b)
Net sales = Sales - Sales returns and allowances
= 920,000 - 37,500 = 882,500
Allowance for uncollcetible accounts during the year = 1.5% of net sales
= 882,500 * 1.5%
= 13,238.
3) (a)
Adjusted balance in the Allowance for uncollcetible accounts = Estimated accounts expected to be uncollectible as per aging analysis
Adjusted balance in the Allowance for uncollcetible accounts = 220,000
Net realizable value of accounts receivable on year end balance sheet = Accounts receivable balance, 12/31
- Adjusted balance in the Allowance for uncollcetible accounts
= 2,920,000 - 220,000
= 2,700,000
3) (b)
Allowance for uncollcetible accounts during the year = Estimated accounts expected to be uncollectible as per aging analysis - Allowance for uncollectible accounts (12/31, unadjusted bal.)
= 220,000 - 126,000
= 94,000.
Journal entry
Bad debt expense 94,000 Allowance for uncollcetible accounts 94,000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.