147. At December 31 of the current year, a company reported the following:
Total sales for the current year: $780,000 includes $160,000 in cash sales
Accounts receivable balance at Dec. 31, end of current year: $190,000
Allowance for Doubtful Accounts balance at January 1, beginning of current year: $8,300
Bad debts written off during the current year: $6,800.
Prepare the necessary adjusting entries to record bad debts expense assuming this company’s
bad debts are estimated to equal:
(a) 1.5% of credit sales.
(b) 5% of accounts receivable.
9-66
148. 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:
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 .
Estimated
Uncollectible
Account Age
Balance
Percentage
Current (not yet due)
……..
1.0
%
1-30 days past due
…………
64,000
3.5
31-60 days past due
……….
16,000
12.0
61-90 days past due
……….
6,500
42.0
Over 90 days past due
……
3,200
67.0
Total
…………………………..
$185,700
149. 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……………………………………………….. $88,000
Credit sales……………………………………………… 275,000
Accounts receivable…………………………………….. $96,000
Allowance for doubtful accounts……………………….. 1,000
Prepare the adjusting entry to estimate bad debts under each of the following separate
situations.
1. Bad debts are estimated to be 2.5% of credit sales.
2. An aging analysis estimates that 8% of the outstanding accounts receivable will be
uncollectible.
Answer:
150. 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:
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 balance of the Allowance for Doubtful Accounts
on January 1 of the current year was $44,000 and that accounts receivable written off during
the current year totaled $49,200.
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.
Accounts
Estimated
Receivable
Account Age
Uncollectible
$ 620,000
Not due yet
………………….
0.5%
1-30 days overdue
…………
2.0
31-60 days overdue
……….
8.0
55,000
61-90 days overdue
……….
20.0
32,000
91-120 days overdue
……..
50.0
18,000
Over 120 days overdue
….
70.0
$1,140,000
Total
151. On December 31, of the current year, a 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 the 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.
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 2.
Answer:
152. Each December 31, Davis 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 $3,200 before any year-end adjustment for
bad debts. Prepare the adjusting journal entry that Davis Company should make on December
31, of the current year, to estimate bad debts expense.
153. 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 Helen Sweet. 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 Helen Sweet. On December 21, Year 2, Helen
Sweet unexpectedly paid her 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.
154. The following series of transactions occurred during Year 1 and Year 2, when Linwood
Co. sold merchandise to John Moore. Linwood’s annual accounting period ends on December
31.
10/01/Yr 1 Sold $12,000 of merchandise to John Moore, terms 2/10, n/30.
11/15/Yr 1 Moore 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 Linwood receives a check from Moore for the maturity value (with interest) of the note.
03/22/Yr 2 Linwood receives notification that Moore’s check is being returned for nonsufficient
funds (NSF).
12/31/Yr 2 Linwood writes off Moore’s account as uncollectible.
Prepare Linwood Co.’s journal entries to record the above transactions. The company uses the
allowance method to account for its bad debt expense.
9-72
155. Prepare general journal entries for the following transactions of Viking Company,
assuming they use the allowance method to account for uncollectible accounts.
Apr 01 Sold $2,500 of merchandise to Arthur Co., receiving an 8%, 90-day, $2,500 note.
15 Wrote off $1,500 owed by Network Co.
30 Received a $6,000, 5%, 30-day note receivable from Calvin Co. as exchange for its
$6,000 account receivable.
May 30 The note received from Calvin on April 30 was collected in full.
Jun 30 Arthur Co. Was unable to pay the note on the due date.
Jul 15 Network Co. paid $1,000 of the amount written off on April 15.
156. Cairo Co. uses the allowance method of accounting for uncollectible accounts. Cairo Co.
accepted a $5,000, 12%, 90-day note dated May 16, from Alexandria Co. in exchange for its
past-due account receivable. Make the necessary general journal entries for Cairo Co. on May
16 and the August 14 maturity date, assuming that the:
a. Note is held until maturity and collected in full at that time.
b. Note is dishonored; the amount of the note and its interest are written off as uncollectible.
157. Prepare general journal entries for the following transactions of this company for the
current year:
Apr. 25 Sold $4,500 of merchandise to CBC Corp., receiving a 10%, 60-day. $4,500 note
receivable.
June 24 The note of CBC Corp., received on April 25 was dishonored.
158. The following data are taken from the comparative balance sheets of Gayle Company.
Compute and interpret its accounts receivable turnover for Year 2. Competitors average
a turnover of 7.5. How is the company doing in relation to its competitors?
Year 2 Year 1
Accounts receivable, net 180,230 280,450
Net sales 1,600,750 1,457,600
159. On April 30, Steinbeck Co. has $448,800 of accounts receivable. 1. Prepare journal
entries to record the following selected May transactions. The company uses the perpetual
inventory system. 2. Also prepare any footnotes to the May 31 financial statements that result
from these transactions. 3. Calculate the balance in the Accounts Receivable account as of
May 10.
May 3 Sold $250,000 of merchandise (that cost $122,000) to customers on credit.
May 5 Sold $300,000 of accounts receivable to Cash Solutions. Cash Solutions charges a
7%
factoring fee.
May 8 Received $165,200 from customers in payment on their accounts.
May 9 Borrowed $50,000 cash from State Bank, pledging $65,000 of accounts receivable
as
security for the loan. The note is a 90-day, 9% note.
Answer: