BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

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

At the end of 20-2, Martel Co. had $380,000 in Accounts Receivable and a debit balance of $6,000 in Allowance for Doubtful Accounts. Because it has been operating for only two years, Martel once again wants to base its estimate of uncollectible accounts on the industry average or the experience of similar companies. The industry and similar company percentages for the year were the same as in 20-1.

Based on Martel Co.’s experience in 20-2, select the most appropriate basis (industry or similar company) for estimating its uncollectible accounts for 20-2. Prepare the adjusting entry on December 31, 20-2 for Martel Co.’s uncollectible accounts.

To determine

Prepare the adjusting entry to record the uncollectible accounts for M Company on December 31, 20-2.

Explanation

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Prepare the adjusting entry to record the uncollectible accounts for M Company on December 31, 20-2.

DateParticularsDebitCredit
December 31, 20-2Bad debt expense$25,000 
    Allowance for doubtful accounts  $25,000
 (To record the estimate amount for uncollectible accounts)  

Table (1)

Working note 1:

Calculate the amount of uncollectible accounts.

Uncollectible accounts = [Accounts receivable balance on Decemebr 31, 20-2×Uncollectible accounts receivable percentage]

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

In your own words, define a joint venture and a syndicate.

Foundations of Business (MindTap Course List)

The present value of a perpetuity is equal to the payment on the annuity, PMT, divided by the interest rate, I:...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)

What factors distinguish DSS from EIS?

Pkg Acc Infor Systems MS VISIO CD