Direct Write-off Method Example: Accounts Receivable balance is $10,000 as of December 31. Customer Ledger: Sue 3,000 Fred 700 Mary 2,300 Bob 4.000 Total 10,000 Fred goes bankrupt in January and will not pay. Use the Direct Write-Off Method. GENERAL JOURNAL 1 2 Date Description Date Description 1 2 Net Realizable Value of Receivables on BS: 9,000 Date Allowance Method The balance of Accounts Receivable is presented on the Balance Sheet with the Allowance account. Accounts Receivable less the Allowance is calculated and presented on the face of the balance sheet. It is what we really expect to collect and is called the Net Realizable Value. Example: In the year 2019 Accounts Receivable balance is 10,000. We estimate bad debt expense of 1,000. Use the Allowance Method. GENERAL JOURNAL In the year 2020 we find out that Fred isn't going to pay. GENERAL JOURNAL Description Post ref 1 2 Net Realizable Value of Receivables on BS is still $9,000 Debit Post ref Post ref Page Debit Credit Debit Page Credit Page 1 2 Credit 1 27 2 1 2

Direct Write-off Method Example: Accounts Receivable balance is $10,000 as of December 31. Customer Ledger: Sue 3,000 Fred 700 Mary 2,300 Bob 4.000 Total 10,000 Fred goes bankrupt in January and will not pay. Use the Direct Write-Off Method. GENERAL JOURNAL 1 2 Date Description Date Description 1 2 Net Realizable Value of Receivables on BS: 9,000 Date Allowance Method The balance of Accounts Receivable is presented on the Balance Sheet with the Allowance account. Accounts Receivable less the Allowance is calculated and presented on the face of the balance sheet. It is what we really expect to collect and is called the Net Realizable Value. Example: In the year 2019 Accounts Receivable balance is 10,000. We estimate bad debt expense of 1,000. Use the Allowance Method. GENERAL JOURNAL In the year 2020 we find out that Fred isn't going to pay. GENERAL JOURNAL Description Post ref 1 2 Net Realizable Value of Receivables on BS is still $9,000 Debit Post ref Post ref Page Debit Credit Debit Page Credit Page 1 2 Credit 1 27 2 1 2

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter8: Revenue Recognition, Receivables, And Advances From Customers

Section: Chapter Questions

Problem 23E

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Bad Debt Expense: Aging Method Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year. The balance in Glencoes allowance for doubtful accounts at the beginning of the year was $58,620 (credit). During the year, accounts in the total amount of $62,400 were written off. Required: 1. Determine bad debt expense. 2. Prepare the journal entry to record bad debt expense. 3. If Glencoe had written off $90,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?
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UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES AND PERCENTAGE OF RECEIVABLES At the completion of the current fiscal year ending December 31, the balance of Accounts Receivable for Yangs Gift Shop was 30,000. Credit sales for the year were 355,200. REQUIRED Make the necessary adjusting entry in general journal form under each of the following assumptions. Show calculations for the amount of each adjustment and the resulting net realizable value. 1. Allowance for Doubtful Accounts has a credit balance of 330. (a) The percentage of sales method is used and bad debt expense is estimated to be 2% of credit sales. (b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of 6,950 in uncollectible accounts. 2. Allowance for Doubtful Accounts has a debit balance of 400. (a) The percentage of sales method is used and bad debt expense is estimated to be 1.5% of credit sales. (b) The percentage of receivables method is used and an analysis of the accounts produces an estimate of 5,685 in uncollectible accounts.
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