The following was taken from the records of Smith Company in the year ending Dec

Question

The following was taken from the records of Smith Company in the year ending December 31, 2014. Journalize the following transactions in an Excel formula 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.

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

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

2.May 20, 2014: Received $4,050 as partial payment on the $8,000 account receivable due from Garcia. The remaining amount is believed to be uncollectible and is written off.

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

4.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 formula 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

Question 1: Jou DateAccount Title Debit Credit 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 415-Sep Allowance for doutful accounts Tang- Accounts receivable Mulaka- Accounts receivable Quan- Accounts receivable December 31,14-Aging of the Accounts Receivables Allowance %Not Paid Days late Amount 0 to 30 31-60 61-90 90days+ TOTAL Ending Balance Dates T-Account Allowanace DebiCredit 1-Feb 20-May 10-Aug 15-Sep Bad Debt Expen EB- Aging Result Question3 Date Account Title 31-Dec Bad Debt Expense Allowance for doutful accounts Question4 Balance Sheet Presentaion Gross Accounts Receivables Ending Blance of Allowance for Doubtbul Accounts Net Realizable Balance

Explanation / Answer

Question 1 Journal Debit Credit 1 01-Feb Allowance for doubtful accounts 7250 Jones - Accounts Receivable 7250 (Amount due from Jones written off) 2 20-May Cash 4050 Allowance for doubtful accounts 4050 (Cash recovered from Garcia - part payment) 20-May Allowance for doubtful accounts 3950 (8000 - 4050) Garcia - Accounts Receivable 3950 (Balance due from Garcia written off) 3 10-Aug Cash 7250 Allowance for doubtful accounts 7250 (Cash received from Jones towards his balance written off on 1 - Feb) 4 15-Sep Allowance for doubtful accounts 7985 Accounts Receivable: Tang 4400 Mulaka 2210 Quan 1375 (Uncollectible accounts receivable written off) Allowance for doubtful accounts (T - Account) Debit Credit 01-Feb Balance brought forward 18000 01-Feb Accounts Receivable - Jones 7250 20-May Cash - Garcia 4050 20-May Garcia - Accounts Receivable 3950 10-Aug Cash Received towards amount written off 7250 15-Sep Accounts Receivable - written off: Tang 4400 Mulaka 2210 Quan 1375 31-Dec Balance carried forward 18015 33250 33250 Journal Entry to record bad debts expense: 31-Dec Calculation of provison required on the basis of aging: Probability of default (%) Provision required 0-30 days 160000 3% 4800 31 -60 days 40000 10% 4000 61 -90 days 18000 20% 3600 > 90 days 1500 50% 750 Total provision required 13150 Existing provision 18015 Bad debts expense -4865 31-Dec Allowance for doubtful accounts 4865 Bad debts expense 4865 (Excess provision for doubtful accounts adjusted) Balance sheet presentation of net realisable value: Accounts Receivable (Gross) 219500 less Allowance for doubtful debts 13150 Net realisable value 206350

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.