The following transactions were completed by Daws Company during the current fiscal year ended December 31: Jan. 29 Received 30% of the $18,900 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible. Apr. 18 Reinstated the account of Spencer Clark, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,265 cash in full payment of Clark’s account. Aug. 9 Wrote off the $6,410 balance owed by Iron Horse Co., which has no assets. Nov. 7 Reinstated the account of Vinyl Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,980 cash in full payment of the account. Dec. 31 Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,090; DeVine Co., $5,485; Moser Distributors, $9,415; Oceanic Optics, $1,190. Dec. 31 Based on an analysis of the $1,774,000 of accounts receivable, it was estimated that $35,480 will be uncollectible. Journalized the adjusting entry. Required: 1. Record the January 1 credit balance of $25,795 in a T account for Allowance for Doubtful Accounts. 2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,774,000 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses. B. Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense. 3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry). 4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables the adjusting entry on December 31 had been based on an estimated expense of ¼ of 1% of the sales of $18,660,000 for the year, determine the following: A. Bad debt expense for the year. B. Balance in the allowance account after the adjustment of December 31. C. Expected net realizable value of the accounts receivable as of December 31.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
| Jan. 29 | Received 30% of the $18,900 balance owed by Kovar Co., a bankrupt business, and wrote off the remainder as uncollectible. |
| Apr. 18 | Reinstated the account of Spencer Clark, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,265 cash in full payment of Clark’s account. |
| Aug. 9 | Wrote off the $6,410 balance owed by Iron Horse Co., which has no assets. |
| Nov. 7 | Reinstated the account of Vinyl Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,980 cash in full payment of the account. |
| Dec. 31 | Wrote off the following accounts as uncollectible (one entry): Beth Connelly Inc., $7,090; DeVine Co., $5,485; Moser Distributors, $9,415; Oceanic Optics, $1,190. |
| Dec. 31 | Based on an analysis of the $1,774,000 of accounts receivable, it was estimated that $35,480 will be uncollectible. Journalized the |
| Required: | |||||||
| 1. | Record the January 1 credit balance of $25,795 in a T account for Allowance for Doubtful Accounts. | ||||||
| 2. |
|
||||||
| 3. | Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry). | ||||||
| 4. | Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables the adjusting entry on December 31 had been based on an estimated expense of ¼ of 1% of the sales of $18,660,000 for the year, determine the following:
|
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 6 images
