Concept explainers
Determining
Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 3 percent, (b) 9 percent, and (c) 28 percent, respectively.
At December 31, 2014 (end of the current accounting year), the
B. Brown—Account Receivable | ||||
Date | Explanation | Debit | Credit | Balance |
3/11/2013 | Sale | 13,000 | 13,000 | |
6/30/2013 | Collection | 3,000 | 10,000 | |
1/31/2014 | Collection | 3,800 | 6,200 | |
D. Donalds—Account Receivable | ||||
2/28/2014 | Sale | 21,000 | 21,000 | |
4/15/2014 | Collection | 8,000 | 13,000 | |
11/30/2014 | Collection | 6,000 | 7,000 | |
N. Napier—Account Receivable | ||||
11/30/2014 | Sale | 8,000 | 8,000 | |
12/15/2014 | Collection | 1,000 | 7,000 | |
S. Strothers—Account Receivable | ||||
3/2/2012 | Sale | 4,000 | 4,000 | |
4/15/2012 | Collection | 4,000 | -0- | |
9/1/2013 | Sale | 9,000 | 9,000 | |
10/15/2013 | Collection | 4,500 | 4,500 | |
2/1/2014 | Sale | 21,000 | 25,500 | |
3/1/2014 | Collection | 5,000 | 20,500 | |
12/31/2014 | Sale | 4,000 | 24,500 | |
T. Thomas—Account Receivable | ||||
12/30/2014 | Sale | 4,000 | 4,000 |
Required:
- 1. Compute the total accounts receivable in each age category.
- 2. Compute the estimated uncollectible amount for each age category and in total.
- 3. Give the
adjusting entry for bad debt expense at December 31, 2014. - 4. Show how the amounts related to accounts receivable should be presented on the 2014 income statement and
balance sheet .
Want to see the full answer?
Check out a sample textbook solutionChapter 6 Solutions
GB 112/212 MANAGERIAL ACC. W/ACCESS >C<
- Determining Bad Debt Expense Using the Aging Method At the beginning of the year, Tennyson Auto Parts had an accounts receivable balance of $31,800 and a balance in the allowance for doubtful accounts of $2,980 (credit). During the year, Tennyson had credit sales of $624,300, collected accounts receivable in the amount of $602,700, wrote off $18,600 of accounts receivable, and had the following data for accounts receivable at the end of the period: Required: 1. Determine the desired post adjustment balance in allowance for doubtful accounts. 2. Determine the balance in allowance for doubtful accounts before the bad debt expense adjusting entry is posted. 3. Compute bad debt expense. 4. Prepare the adjusting entry to record bad debt expense.arrow_forwardBad Debt Expense: Aging Method Glencoe Supply had the following accounts receivable aging schedule at the end of a recent year. The balance in Glencoes allowance for doubtful accounts at the beginning of the year was $58,620 (credit). During the year, accounts in the total amount of $62,400 were written off. Required: 1. Determine bad debt expense. 2. Prepare the journal entry to record bad debt expense. 3. If Glencoe had written off $90,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?arrow_forwardMirror Mart uses the balance sheet aging method to account for uncollectible debt on receivables. The following is the past-due category information for outstanding receivable debt for 2019. To manage earnings more efficiently, Mirror Mart decided to change past-due categories as follows. Complete the following. A. Complete each table by filling in the blanks. B. Determine the difference between total uncollectible. C. Explain how the new total uncollectible amount affects net income and accounts receivable.arrow_forward
- Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $10,500; (2) up to 120 days past due, $3,500; and (3) more than 120 days past due, $3,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 3 percent, (2) 10 percent, and (3) 25 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $660 (credit) before the end-of-period adjusting entry is made. Data during the current year follow: a. During December, an Account Receivable (Patty's Bake Shop) of $610 from a prior sale was determined to be uncollectible; therefore, it was written off immediately as a bad debt. b. On December 31, the appropriate adjusting entry for the year was recorded. Required: 1. Give the required journal entries for the two…arrow_forwardChou Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $276,000; (2) up to 120 days past due, $51,000; and (3) more than 120 days past due, $26,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 4.0 percent, (2) 10 percent, and (3) 30 percent, respectively. At December 31, the end of the current year, the Allowance for Doubtful Accounts balance is $400 (credit) before the end-of-period adjusting entry is made. 1. Prepare the appropriate bad debt expense adjusting entry for the current year.2. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance sheet.arrow_forwardChou Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $295,000; (2) up to 120 days past due, $55,000; and (3) more than 120 days past due, $18,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 2.5 percent, (2) 11 percent, and (3) 30 percent, respectively. At December 31, the end of the current year, the Allowance for Doubtful Accounts balance is $100 (credit) before the end-of- period adjusting entry is made. Required: 1. Prepare the appropriate bad debt expense adjusting entry for the current year. 2. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance sheet.arrow_forward
- Chou Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $295,000; (2) up to 120 days past due, $55,000; and (3) more than 120 days past due, $18,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 2.5 percent, (2) 11 percent, and (3) 30 percent, respectively. At December 31, the end of the current year, the Allowance for Doubtful Accounts balance is $100 (credit) before the end-of-period adjusting entry is made. Please complete the two tables based on the information above and explian how it was done (fromulas and rules involved), If you can please do the work manually.arrow_forwardChou Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time perlods as follows: (1) not yet due, $281,000; (2) up to 120 days past due, $58,000; and (3) more than 120 days past due, $22,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 4.0 percent, (2) 12 percent, and (3) 32 percent, respectively. At December 31, the end of the current year, the Allowance for Doubtful Accounts balance is $200 (credit) before the end-of-period adjusting entry is made. Required: 1. Prepare the appropriate bad debt expense adjusting entry for the current year. 2. Show how the various accounts related to accounts receivable should be shown on the December 31, current year, balance sheet. Complete this question by entering your answers in the tabs below. Required 1 Requirea 2 Show how the various accounts related to…arrow_forwardCasilda Company uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $51,300 of which 3 percent is estimated to be uncollectible (2) up to 180 days past due, $14,900 of which 11 percent is estimated to be uncollectible, and (3) more than 180 days past due, $5,400 of which 31 percent is estimated to be uncollectible. At December 31, end of the current year, the Allowance for Doubtful Accounts balance is $300 (credit) before the end-of-period adjusting entry is made. Record the adjusting journal entry for bad debt expenses & Show how the various accounts(Accounts receivable, allowance for doubful debts) related to accounts receivable should be shown on December 31 Current year balance Sheet.arrow_forward
- Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) 1 to 30 days old, $12,200; (2) 31 to 90 days old, $5,200; and (3) more than 90 days old, $3,200. For each age group, the average loss rate on the amount of the receivable due to uncollectibility is estimated to be (1) 4 percent, (2) 12 percent, and (3) 15 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance was $820 (credit) before the end-of-period adjusting entry is made. Required: 1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 2. What amount of Bad Debt Expense should be recorded on December 31? 3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $620 debit balance, what amount of Bad Debt Expense should be recorded on December 31? Complete this question by entering your answers in…arrow_forwardBrown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account receivable is aged on the basis of three time periods as follows: (1) 1 to 30 days old, $12,400; (2) 31 to 90 days old, $5,400; and (3) more than 90 days old, $3,400. For each age group, the average loss rate on the amount of the receivable due to uncollectibility is estimated to be (1) 6 percent, (2) 10 percent, and (3) 15 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance was $840 (credit) before the end-of-period adjusting entry is made. Required: 1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts. 2. What amount of Bad Debt Expense should be recorded on December 31? 3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $640 debit balance, what amount of Bad Debt Expense should be recorded on December 31? Complete this question by entering your answers in…arrow_forwardGlencoe Supply had the following accounts receivable aging schedule at the end of a recent year. The balance in Glencoe’s allowance for doubtful accounts at the beginning of the year was$58,620 (credit). During the year, accounts in the total amount of $62,400 were written off.Required:1. Determine bad debt expense.2. Prepare the journal entry to record bad debt expense.3. If Glencoe had written off $90,000 of receivables as uncollectible during the year, how muchwould bad debt expense reported on the income statement have changed?arrow_forward
- Cornerstones of Financial AccountingAccountingISBN:9781337690881Author:Jay Rich, Jeff JonesPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College