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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Sam and Robert are identical twins. They opened identical businesses and experienced identical transactions. However, they decided to estimate uncollectible accounts in different ways. Sam elected to use the percentage of sales method, and Robert elected to use the percentage of receivables method. Listed below are the beginning balances of Cash, Accounts Receivable, and Allowance for Doubtful Accounts [items (a)-(c)], and summary transactions that occurred during the year [items (d)-(g)] for both businesses. Remember, both businesses experienced the same events: credit sales, collections of receivables, and write-offs. The only difference between the businesses is the method of estimating uncollectible accounts.

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REQUIRED

  1. 1. Enter items (a) through (c) in two sets of general ledger accounts: one for Sam and one for Robert.

For Sam:

  1. 2. Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Sam.
  2. 3. Post the entries to a general ledger for Sam, using the following accounts and numbers.

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  1. 4. Sam estimates that 1% of all sales on account will be uncollectible. Calculate the estimated bad debt expense and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--.
  2. 5. Compute the net realizable value of Sam’s accounts receivable on December 31, 20--.

For Robert:

  1. 6. Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Robert.
  2. 7. Post the entries to a general ledger for Robert, using the same accounts and numbers as were used for Sam.
  3. 8. Robert bases the estimate of uncollectible accounts on an aging schedule of accounts receivable. Using the following information, compute the estimated uncollectible amounts and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--.

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All sales are billed n/30. The following aging chart is used to estimate the uncollectibles using the percentage of receivables method:

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  1. 9. Compute the net realizable value of Robert’s accounts receivable on December 31, 20--.

Requirement 2, 4, 6, and 8:

To determine

Record the given transactions in a general journal format and prepare the adjusting entry in a general journal.

Explanation

Record the given transactions in a general journal format and prepare the adjusting entry in a general journal.

Requirement 1, 3, and 4:

To determine

Prepare general ledger accounts; post the journal entries and adjusting entries to the ledger account on December 31, 20--.

5.

To determine

Calculate the net realizable value for A’s accounts as of December 31, 20--.

Requirement 1, 7, and 8:

To determine

Prepare general ledger accounts; post the journal entries and adjusting entries to the ledger account on December 31, 20--.

8.

To determine

Compute the estimated uncollectible amounts by using the aging schedule of accounts receivable.

9.

To determine

Calculate the net realizable value for R’s accounts as of December 31, 20--.

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