Intermediate Accounting, Student Value Edition (2nd Edition)
2nd Edition
ISBN: 9780134732145
Author: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
Publisher: PEARSON
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Textbook Question
Chapter 21, Problem 21.6P
Change in Estimate, Inventory,
| Credit sales | $2,500,000 |
| 1,600,000 | |
| Sales | 3,000,000 |
| Selling and administrative expenses | 480.000 |
| Restructuring gain (pretax) | 720,000 |
| Cash dividends declared | 190,000 |
| Cost of goods sold | 1,755,000 |
| Error correction: 2013 rent was unpaid and unrecorded | 40,000 |
| Interest income | 480,000 |
| Interest expense | 820,000 |
| Gain on sale of investments (pre-tax) | 500,000 |
- On January 1, 2018, Rocket Man changed its plant and equipment accounting for
depreciation from the double-declining balance method to the straight-line method. Rocket Man purchased the assets on January 1, 2017 for $600,000; they had no scrap value and useful lives of 10 years. The balance in theaccumulated depreciation account at January 1, 2018 amounted to $120,000. Rocket Man recorded the straight-line depreciation expense of $53,333 in 2018 and included it in the $480,000 reported for selling and administrative expenses. Depreciation expense would have been $96,000 if Rocket Man still used the double-declining balance method. - Bad debt expense for 2018 of $50,000 is included in selling general and administrative expenses on the income statement. Rocket Man uses the percentage of accounts receivable method of estimating bad debt expense The estimated percentage was 5% in both 2016 and 2017 but changed to 10% in 2018 At December 31, 2018, the Accounts Receivable balance is $600,000 and the Allowance for Uncollectible Accounts (before adjustment) was $10,000 credit balance
Required
- a. Assuming a tax rate of 40% prepare the multiple-step income statement for Rocket Man for the year ended December 31. 2018.
- b. Compute the cumulative effect of the accounting changes made in 2018.
- c. Prepare the
journal entries to record the accounting changes made in 2018 - d. Prepare the footnote disclosures required for the accounting changes made in 2018
- e. Prepare the retained earnings column of the statement of
stockholders equity for the year ended December 31. 2018
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The data below is for Alta Corporation for 2016.Accounts receivable--December 31, 2016 $2,144,000Customer accounts written off as uncollectible during 2016 32,000Allowance for doubtful accounts--January 1, 2016 34,800Estimated uncollectible accounts based on an aging analysis 42,400
If the aging approach is used to estimate bad debts, determine the bad debt expense for 2016.
Average Uncollectible Account Losses and Bad Debt Expense
The accountant for Porile Company prepared the following data for sales and losses from uncollectible accounts:
Losses from
Year
Credit Sales
Uncollectible Accounts*
2015
$866,000
$11,125
2016
952,000
14,840
2017
1,083,000
16,790
2018
1,189,000
16,850
*Losses from uncollectible accounts are the actual losses related to sales of that year (rather than write-offs of that year).
Required:
1. Calculate the average percentage of losses from uncollectible accounts for 2015 through 2018. Enter your answer as percentage, rounded to one decimal place (e.g. .0248563 to 2.5%).
1.45 x %
2. Assume that the credit sales for 2019 are $1,300,000 and that the weighted average percentage calculated in Requirement 1 is used as an estimate of losses from uncollectible accounts for 2019 credit sales.
Determine the bad debt expense for 2019 using the percentage of credit sales method. Round your answer to the nearest dollar.
5,931 X
Here is information related to Splish Company for 2022.
Total credit sales
$2,550,000
Accounts receivable at December 31
848,000
Uncollectibles written off
32,000
(a)
What amount of bad debt expense will Splish Company report if it uses the direct write-off method of accounting for uncollectibles?$____________
(b)
Assume that Splish Company uses the percentage-of-receivables basis to record bad debt expenseand concludes that 5% of accounts receivable will become uncollectible. What amount of bad debt expense will Splish record if Allowance for Doubtful Accounts has a credit balance of $3,700?$__________
(c)
Assume that Splish Company uses the percentage-of-receivables basis to record bad debt expenseand concludes that 5% of accounts receivable will become uncollectible. What amount of bad debt expense will Splish record if Allowance for Doubtful Accounts has a debit balance of $3,700?$__________
Chapter 21 Solutions
Intermediate Accounting, Student Value Edition (2nd Edition)
Ch. 21 - Are accounting changes permitted in financial...Ch. 21 - How do firms report accounting changes under the...Ch. 21 - Prob. 21.3QCh. 21 - How do firms account for changes in accounting...Ch. 21 - Prob. 21.5QCh. 21 - Prob. 21.6QCh. 21 - Prob. 21.7QCh. 21 - Prob. 21.8QCh. 21 - Do accounting errors that self-correct within two...Ch. 21 - Does a firm need to correct an error that...
Ch. 21 - Prob. 21.1MCCh. 21 - Prob. 21.2MCCh. 21 - Prob. 21.3MCCh. 21 - Prob. 21.4MCCh. 21 - Prob. 21.5MCCh. 21 - Prob. 21.1BECh. 21 - Prob. 21.2BECh. 21 - Prob. 21.3BECh. 21 - Prob. 21.4BECh. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.6BECh. 21 - Prob. 21.7BECh. 21 - Prob. 21.8BECh. 21 - Prob. 21.9BECh. 21 - Prob. 21.10BECh. 21 - Prob. 21.11BECh. 21 - Prob. 21.12BECh. 21 - Prob. 21.13BECh. 21 - Prob. 21.14BECh. 21 - Change in Accounting Principle, Inventory. Massi...Ch. 21 - Change in Accounting Principle, Long-Term...Ch. 21 - Prob. 21.3ECh. 21 - Change in Accounting Principle, Inventory. Winthur...Ch. 21 - Prob. 21.5ECh. 21 - Prob. 21.6ECh. 21 - Error Analysis and Correction. Feinstein and...Ch. 21 - Prob. 21.8ECh. 21 - Prob. 21.9ECh. 21 - Prob. 21.10ECh. 21 - Change in Accounting Principle, Inventory. Second...Ch. 21 - Prob. 21.2PCh. 21 - Prob. 21.3PCh. 21 - Prob. 21.4PCh. 21 - Prob. 21.5PCh. 21 - Change in Estimate, Inventory, Bad Debt Expense....Ch. 21 - Prob. 21.7PCh. 21 - Cases Judgment Case Judgment Case: Materiality and...Ch. 21 - Prob. 1FSCCh. 21 - Surfing the Standards: Change in Accounting...Ch. 21 - Prob. 1BCC
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