P8-5A Pearson Company uses the allowance method to estimate uncollectible accounts receivable. The company produced the following information from aging its accounts receivable at year end: Number of Days Outstanding Total 0-30 31-60 61-90 91-120 Accounts receivable Estimated % uncollectible Estimated uncollectible $640,000 $360,000 $140,000 $100,000 10% $40,000 2% 5% 30% accounts The unadjusted balance in Allowance for Doubtful Accounts is a debit of $3,000. Instructions (a) Complete the aging schedule and calculate the total estimated uncollectible accounts. (b) Record the bad debt adjusting entry using the information determined in part (a). (c) In the following year, $18,000 of the outstanding accounts receivable is determined to be uncollectible. Record the write off of the uncollectible accounts. (d) The company collects $4,500 of the $18,000 of accounts that was determined to be uncollectible in part (c). The company also expects to collect an additional S1,000. Record the journal entry (or entries) to restore the accounts receivable and the cash collected. Collection of the $1,000 is expected in the near future. (e) Explain how using the allowance method matches expenses with revenues. (f) Explain how using the allowance method values Accounts Receivable at net realizable value on the balance sheet.
P8-5A Pearson Company uses the allowance method to estimate uncollectible accounts receivable. The company produced the following information from aging its accounts receivable at year end: Number of Days Outstanding Total 0-30 31-60 61-90 91-120 Accounts receivable Estimated % uncollectible Estimated uncollectible $640,000 $360,000 $140,000 $100,000 10% $40,000 2% 5% 30% accounts The unadjusted balance in Allowance for Doubtful Accounts is a debit of $3,000. Instructions (a) Complete the aging schedule and calculate the total estimated uncollectible accounts. (b) Record the bad debt adjusting entry using the information determined in part (a). (c) In the following year, $18,000 of the outstanding accounts receivable is determined to be uncollectible. Record the write off of the uncollectible accounts. (d) The company collects $4,500 of the $18,000 of accounts that was determined to be uncollectible in part (c). The company also expects to collect an additional S1,000. Record the journal entry (or entries) to restore the accounts receivable and the cash collected. Collection of the $1,000 is expected in the near future. (e) Explain how using the allowance method matches expenses with revenues. (f) Explain how using the allowance method values Accounts Receivable at net realizable value on the balance sheet.
College Accounting, Chapters 1-27
23rd Edition
ISBN:9781337794756
Author:HEINTZ, James A.
Publisher:HEINTZ, James A.
Chapter16: Accounting For Accounts Receivable
Section: Chapter Questions
Problem 3CP: At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in...
Related questions
Question
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 5 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
College Accounting, Chapters 1-27
Accounting
ISBN:
9781337794756
Author:
HEINTZ, James A.
Publisher:
Cengage Learning,
Cornerstones of Financial Accounting
Accounting
ISBN:
9781337690881
Author:
Jay Rich, Jeff Jones
Publisher:
Cengage Learning
Principles of Accounting Volume 1
Accounting
ISBN:
9781947172685
Author:
OpenStax
Publisher:
OpenStax College
Financial Accounting
Accounting
ISBN:
9781337272124
Author:
Carl Warren, James M. Reeve, Jonathan Duchac
Publisher:
Cengage Learning