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Answer:
181) The Tulip Company uses the percent of receivables method of accounting for uncollectible
accounts receivable, and a perpetual inventory system. As of January 1, its net accounts
receivable totaled $485,000 (Accounts Receivable $500,000 less a $15,000 Allowance for
Doubtful Accounts). During the current year, the following transactions occurred.
Merchandise costing $2,400,000 was sold on account for $4,000,000.
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The company collected $3,880,000 from customers on account.
$20,000 of accounts receivable were deemed uncollectible and written
off.
$3,000 of accounts receivable previously written off as uncollectible were
recovered.
At year-end, Lily Company estimates that 3% of its accounts receivable
are uncollectible.
Prepare journal entries to record these transactions.
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182) The Branson Company uses the percent of sales method of accounting for uncollectible
accounts receivable. During the current year, the following transactions occurred:
Mar 7
Branson Company determined that the $2,000 account receivable of the Bing
Company was uncollectible, and wrote it off.
Jun 9
Bing Company paid $1,500 of the amount owed to the Branson
Company. Branson Company does not expect further collections from the
Bing Company.
Dec 31
Branson Company estimates that 1.5% of its $900,000 of credit
sales will be uncollectible.
Prepare the general journal entries to record these transactions.
Mar. 7
Allowance for Uncollectible Accounts……………..
Jun. 9
Accounts Receivable–Bing…………………………….
Cash……………………………………………………………
Dec 31
Bad Debts Expense ($900,000 * .015)…………….
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183) Thatcher Company had a January 1, credit balance in its Allowance for Doubtful Accounts
of $4,000 for the current year. The following transactions and events affected the Allowance for
Doubtful Accounts during the current year:
Apr 15
Bean’s account receivable of $2,700 was deemed uncollectible.
July 1
Cho paid the full amount of a previously written-off account receivable.
This receivable of $1,300 had been written off in the prior year.
Dec 31
Bad debts expense of $4,500 was recorded.
What amount should appear in the allowance for doubtful accounts in the December 31, balance
sheet for the current year?
184) Owens Company uses the direct write-off method of accounting for uncollectible accounts
receivable. On December 6, Year 1, Owens sold $6,300 of merchandise to the Valley Company.
On August 8, Year 2, after numerous attempts to collect the account, Owens determined that the
account of the Valley Company was uncollectible.
a. Prepare the journal entry required to record the transactions on August 8.
b. Assuming that the $6,300 is material, explain how the direct write-off method violates the
expense recognition principle in this case.
Aug. 8
Bad Debts Expense……………………………….
185) At December 31 of the current year, a company reported the following:
Total sales for the current year: $980,000 includes $160,000 in cash sales
Accounts receivable balance at Dec. 31, end of current year: $160,000
Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300 credit
Bad debts written off during the current year: $5,800.
Prepare the necessary adjusting entries to record bad debts expense assuming this company’s bad
debts are estimated to equal 5% of accounts receivable.
186) At December 31 of the current year, a company reported the following:
Total sales for the current year: $980,000 includes $160,000 in cash sales
Accounts receivable balance at Dec. 31, end of current year: $160,000
Allowance for Doubtful Accounts balance at January 1, beginning of current year: $7,300
Bad debts written off during the current year: $5,800.
Prepare the necessary adjusting entries to record bad debts expense assuming this company’s bad
debts are estimated to equal 1.5% of credit sales:
187) A company has the following unadjusted account balances at December 31, of the current
year; Accounts Receivable of $185,700 and Allowance for Doubtful Accounts of $1,600 (credit
balance). The company uses the aging of accounts receivable to estimate its bad debts. The
following aging schedule reflects its accounts receivable at the current year-end:
Account Age
Balance
Estimated
Uncollectible
Percentage
Current (not yet due)
$96,000
1.0%
1–30 days past due
64,000
2.5%
30–60 days past due
16,000
11.0%
61–90 days past due
6,500
37.0%
Over 90 days past due
3,200
70.0%
Total
$185,700
1. Calculate the amount of the Allowance for Doubtful Accounts that should appear on the
December 31, of the current year, balance sheet.
2. Prepare the adjusting journal entry to record bad debts expense for the current year.
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188) A company has the following unadjusted account balances at December 31, of the current
year; Accounts Receivable of $183,400 and Allowance for Doubtful Accounts of $1,600 (credit
balance). The company uses the aging of accounts receivable to estimate its bad debts. The
following aging schedule reflects its accounts receivable at the current year-end:
Account Age
Balance
Estimated
Uncollectible
Percentage
Current (not yet due)
$106,000
2.0%
1–30 days past due
54,000
4.0%
30–60 days past due
12,000
10.0%
61–90 days past due
8,500
25.0%
Over 90 days past due
2,900
75.0%
Total
$183,400
Calculate the amount of the Allowance for Doubtful Accounts that should appear on the
December 31, of the current year, balance sheet.
189) A company had the following items and amounts in its unadjusted trial balance as of
December 31 of the current year:
Debit
Credit
Cash sales…………………………………..
$188,000
Credit sales…………………………………
275,000
Accounts receivable………………………..
$76,000
Allowance for doubtful accounts…………..
1,000
Prepare the adjusting entry to estimate bad debts assuming an aging analysis estimates that 8% of
the outstanding accounts receivable will be uncollectible.
Desired balance in allowance account:
$76,000 * .08 =
$ 6,080 credit
Current balance in allowance account:
Adjustment to allowance account
$ 5,080 credit
190) A company had the following items and amounts in its unadjusted trial balance as of
December 31 of the current year:
Debit
Credit
Cash sales…………………………………..
$188,000
Credit sales…………………………………
275,000
Accounts receivable………………………..
$76,000
Allowance for doubtful accounts…………..
1,000
Prepare the adjusting entry to estimate bad debts assuming bad debts are estimated to be 2.5% of
credit sales.
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191) A company uses the aging of accounts receivable method to estimate its bad debts expense.
On December 31 of the current year an aging analysis of accounts receivable revealed the
following:
Account Age
Balance
Estimated
Uncollectible
Percentage
Current (not yet due)
$620,000
0.5%
1–30 days past due
270,000
2.0%
30–60 days past due
145,000
8.0%
61–90 days past due
55,000
20.0%
90–120 days past due
32,000
50.0%
Over 120 days past due
18,000
70.0%
Total
$1,140,000
Required:
a. Calculate the amount of the Allowance for Doubtful Accounts that should be reported on the
current year-end balance sheet.
b. Calculate the amount of the Bad Debts Expense that should be reported on the current year’s
income statement, assuming that the credit balance of the Allowance for Doubtful Accounts on
January 1 of the current year was $41,000 and that accounts receivable written off during the
current year totaled $43,200.
c. Prepare the adjusting entry to record bad debts expense on December 31 of the current year.
d. Show how Accounts Receivable will appear on the current year-end balance sheet as of
December 31.
192) On December 31, of the current year, Spectrum Company’s unadjusted trial balance
revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75%
were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance).
Prepare the adjusting journal entry to record Spectrum’s estimate for bad debts assuming:
1. 6.0% of the accounts receivable balance is assumed to be uncollectible.
2. Bad debts expense is estimated to be 1.5% of credit sales.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on
the balance sheet after adjustment assuming the percentage of sales method is used.
4. Prepare the entry to write off a $1,500 account receivable on January 1 of the next year.
5. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on
the balance sheet immediately after writing off the account in part 4 assuming the percentage of
sales method is used.
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193) Each December 31, Kimura Company ages its accounts receivable to determine the amount
of its adjustment for bad debts. At the end of the current year, management estimated that
$16,900 of the accounts receivable balances would be uncollectible. The Allowance for Doubtful
Accounts account had a debit balance of $1,200 before any year-end adjustment for bad debts.
Prepare the adjusting journal entry that Kimura Company should make on December 31, of the
current year.
194) A company that uses the percent of sales to account for its bad debts had credit sales of
$740,000 in Year 1, including a $720 sale to Marshall Fresh. On December 31, Year 1, the
company estimated its bad debts at 1.5% of its credit sales. On June 1, Year 2, the company
wrote off, as uncollectible, the $720 account of Marshall Fresh. On December 21, Year 2,
Marshall Fresh unexpectedly paid his account in full. Prepare the necessary journal entries:
(a) On December 31, Year 1, to reflect the estimate of bad debts expense.
(b) On June 1, Year 2, to write off the bad debt.
(c) On December 21, Year 2, to record the unexpected collection.
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195) The following series of transactions occurred during Year 1 and Year 2, when Foxworth
Co. sold merchandise to Kevin Lewis. Foxworth’s annual accounting period ends on December
31.
10/01/Yr 1 Sold $12,000 of merchandise to K. Lewis, terms n/30.
11/15/Yr 1 Lewis reports that he cannot pay the account until early next year. He agrees to
exchange the account for a 120-day, 12% note receivable.
12/31/Yr 1 Prepared the adjusting journal entry to record accrued interest on the note.
03/15/Yr 2 Foxworth receives a check from Lewis for the maturity value (with interest) of the
note.
03/22/Yr 2 Foxworth receives notification that Lewis’ check is being returned for nonsufficient
funds (NSF).
12/31/Yr 2 Foxworth writes off Lewis’ account as uncollectible.
Prepare Foxworth Co.’s journal entries to record the above transactions. The company uses the
allowance method to account for its bad debt expense.
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