P7.4 (LO 3) (Bad-Debt Reporting) From inception of operations to December 31, 2020, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Fortner's usual credit terms are net 30 days. (CMA adapted) The balance in Allowance for Doubtful Accounts was $130,000 (Cr.) at January 1, 2020. During 2020, credit sales totaled $9,000,000, the provision for doubtful accounts was determined to be $180,000, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Fortner installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows. Classification by Month of Sale Balance in Each Category Estimated % Uncollectible November-December 2020 $1,080,000 650,000 2% July-October 10% January-June Prior to 1/1/20 25% 80% 420,000 150.000 $2,300,000 Based on the review of collectibility of the account balances in the "prior to 1/1/20" aging category, additional receivables totaling $60,000 were written off as of December 31, 2020. The So% uncollectible estimate applies to the remaining $90,000 in the category. Effective with the year ended December 31, 2020, Fortner adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. Instructions a. Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2020. Show supporting computations in good form. (Hint: In computing the 12/31/20 allowance, subtract the $60,00O write-off.) b. Prepare the journal entry for the year-end adjustment to Allowance for Doubtful Accounts balance as of December 31, 2020. (AICPA adapted) P7-5 (LO 3) (Bad-Debt Reporting) Presented below is information related to the Accounts Receivable accounts of Gulistan Inc. during the current year 2020. 1. An aging schedule of the accounts receivable as of December 31, 2020, is as follows. Age Under 60 days 60-90 days % to Be Applied after Correction Is Made 196 3% Net Debit Balance $172,342 136,490 39,924 23.644 69%6 91-120 days Over 120 days S3-700 definitely uncollectible; estimated remainder $372.400 uncollectible is 25% *The $3.240 write-off of receivables is related to the 91-to-120 day category. 2. The Accounts Receivable control account has a debit balance of $372,40oo on December 31, 2020. 3. Two entries were made in the Bad Debt Expense account during the year: (1) a debit on December 31 for the amount credited to Allowance for Doubtful Accounts, and (2) a credit for $3,240 on November 3, 2020, and a debit to Allowance for Doubtful Accounts because of a bankruptcy. 4. Allowance for Doubtful Accounts is as follows for 2020. Allowance for Doubtful Accounts Jan. 1 Dec. 31 Beginning balance 5% of $372,400 8,750 18,620 Nov. 3 Uncollectible accounts written off 3,240

P7.4 (LO 3) (Bad-Debt Reporting) From inception of operations to December 31, 2020, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Fortner's usual credit terms are net 30 days. (CMA adapted) The balance in Allowance for Doubtful Accounts was $130,000 (Cr.) at January 1, 2020. During 2020, credit sales totaled $9,000,000, the provision for doubtful accounts was determined to be $180,000, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Fortner installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows. Classification by Month of Sale Balance in Each Category Estimated % Uncollectible November-December 2020 $1,080,000 650,000 2% July-October 10% January-June Prior to 1/1/20 25% 80% 420,000 150.000 $2,300,000 Based on the review of collectibility of the account balances in the "prior to 1/1/20" aging category, additional receivables totaling $60,000 were written off as of December 31, 2020. The So% uncollectible estimate applies to the remaining $90,000 in the category. Effective with the year ended December 31, 2020, Fortner adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. Instructions a. Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31, 2020. Show supporting computations in good form. (Hint: In computing the 12/31/20 allowance, subtract the $60,00O write-off.) b. Prepare the journal entry for the year-end adjustment to Allowance for Doubtful Accounts balance as of December 31, 2020. (AICPA adapted) P7-5 (LO 3) (Bad-Debt Reporting) Presented below is information related to the Accounts Receivable accounts of Gulistan Inc. during the current year 2020. 1. An aging schedule of the accounts receivable as of December 31, 2020, is as follows. Age Under 60 days 60-90 days % to Be Applied after Correction Is Made 196 3% Net Debit Balance $172,342 136,490 39,924 23.644 69%6 91-120 days Over 120 days S3-700 definitely uncollectible; estimated remainder $372.400 uncollectible is 25% *The $3.240 write-off of receivables is related to the 91-to-120 day category. 2. The Accounts Receivable control account has a debit balance of $372,40oo on December 31, 2020. 3. Two entries were made in the Bad Debt Expense account during the year: (1) a debit on December 31 for the amount credited to Allowance for Doubtful Accounts, and (2) a credit for $3,240 on November 3, 2020, and a debit to Allowance for Doubtful Accounts because of a bankruptcy. 4. Allowance for Doubtful Accounts is as follows for 2020. Allowance for Doubtful Accounts Jan. 1 Dec. 31 Beginning balance 5% of $372,400 8,750 18,620 Nov. 3 Uncollectible accounts written off 3,240

Principles of Accounting Volume 1

19th Edition

ISBN:9781947172685

Author:OpenStax

Publisher:OpenStax

Chapter9: Accounting For Receivables

Section: Chapter Questions

Problem 4PB: Bristax Corporation recorded $1,385,660 in credit sales for the year, and $732,410 in accounts...

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