Problem 2: Accounting for Bad Debts: The following is selected account information and activity for the year ended 12/31/19: Beginning Account Balances 1/1/19 Accounts Receivable $60,000 1/1/19 Allowance for Doubtful Accounts $2,000 2019 Activity Sales on account $800,000 Cash collections of $740,000 net of $12,000 in sales discounts Sales returns totaled $30,000 Sales allowances totaled $10,000 Accounts receivable written-off as uncollectible totaled $2,800 Required Use the information above to calculate bad debts expense under the two following mutually exclusive and independent assumptions: a. A review of 12/31/19 subsidiary accounts receivable indicated that $3,000 was estimated to be uncollectible. b. Bad debts are estimated to run at 0.5% of sales based on historical data adjusted for current credit granting and collection procedures. For each of the above (a., b.) mutually exclusive and independent assumptions: Prepare the appropriate adjusting journal entry. Indicate the financial statement presentation: Net Accounts Receivable for the year-ended 12/31/19. 2019 Bad Debts Expense
Problem 2: Accounting for Bad Debts: The following is selected account information and activity for the year ended 12/31/19: Beginning Account Balances 1/1/19 Accounts Receivable $60,000 1/1/19 Allowance for Doubtful Accounts $2,000 2019 Activity Sales on account $800,000 Cash collections of $740,000 net of $12,000 in sales discounts Sales returns totaled $30,000 Sales allowances totaled $10,000 Accounts receivable written-off as uncollectible totaled $2,800 Required Use the information above to calculate bad debts expense under the two following mutually exclusive and independent assumptions: a. A review of 12/31/19 subsidiary accounts receivable indicated that $3,000 was estimated to be uncollectible. b. Bad debts are estimated to run at 0.5% of sales based on historical data adjusted for current credit granting and collection procedures. For each of the above (a., b.) mutually exclusive and independent assumptions: Prepare the appropriate adjusting journal entry. Indicate the financial statement presentation: Net Accounts Receivable for the year-ended 12/31/19. 2019 Bad Debts Expense
Financial And Managerial Accounting
15th Edition
ISBN:9781337902663
Author:WARREN, Carl S.
Publisher:WARREN, Carl S.
Chapter5: Accounting For Retail Businesses
Section: Chapter Questions
Problem 34E
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Please can you follow the instructions and complete ONLY problem 2 with all parts. Thank you so much.
Problem 2: Accounting for Bad Debts
- Prepare T-Accounts for A/R; Allowance for Doubtful Accounts and Bad Debt Expense
- Put beginning balances that are given in these accounts.
- Record the
Journal Entries for Current Year Activity- Post the JEs Activity to T-accounts above.
- Prepare
Adjusting Journal Entries for "a" and "b" based on the assumptions given in "a" and "b" - Indicate the following information that would appear on the financial statements under "a" and "b"
Accounts Receivable - Allowance for Doubtful Accounts
- Net realizable A/R --- (just subtract the two above)
- Bad Debt Expense
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