(1)
Direct write-off method:
This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.
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,
To Compute: The bad debts expense of 2018.
(2)
To compute: The amount of bad debts written-off during 2018.
(3)
To compute: The amount of bad debts expenses for 2018 if the company uses the direct write off method.
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Chapter 7 Solutions
INTERMEDIATE ACCOUNTING(LL)-W/CONNECT
- PA5. LO 9.2 The following accounts receivable information pertains to Luxury Cruises. Past-Due Category Accounts Receivable Total Percentage Uncollectible 0-30 days 31-90 days Over 90 days $1,166,350 577,870 324,450 15% 33% 48% A. Determine the estimated uncollectible bad debt for Luxury Cruises in 2018 using the balance sheet aging of receivables method. B. Record the year-end 2018 adjusting journal entry for bad debt. C. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $187,450; record the year-end entry for bad debt, taking this into consideration. D. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $206,770; record the year-end entry for bad debt, taking this into consideration. E. On January 24, 2019, Luxury Cruises identifies Landon Walker's account as uncollectible in the amount of $4,650. Record the entry for identification.arrow_forwardPA 4. LO 9.2 Jars Plus recorded $861,430 in credit sales for the year and $488,000 in accounts receivable. The uncollectible percentage is 2.3% for the income statement method, and 3.6% for the balance sheet method. A. Record the year-end adjusting entry for 2018 bad debt using the income statement method. B. Record the year-end adjusting entry for 2018 bad debt using the balance sheet method. C. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $10,220, record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method. D. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $5,470, record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method.arrow_forwardProblem 7-8 (Algo) Factoring of accounts receivable; without recourse [LO7-8] Samson Wholesale Beverage Company regularly factors its accounts receivable with the Milpitas Finance Company. On April 30, 2021, the company transferred $890,000 of accounts receivable to Milpitas. The transfer was made without recourse. Milpitas remits 90% of the factored amount and retains 10%. When Milpitas collects the receivables, it remits to Samson the retained amount less a 4% fee (4% of the total factored amount). Samson estimates the fair value of the last 10% of its receivables to be $69,000. Required: Prepare the journal entry for Samson Wholesale Beverage for the transfer of accounts receivable on April 30, assuming the sale criteria are met. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) O Answer is not complete. No Event General Journal Debit Credit 1 Cash 801,000 Loss on sale of receivables 59,720 X Receivable from factor…arrow_forward
- 00:58: 44 Question 1/18 Ann, Inc. uses the percentage of sales basis to estimate its bad debts, For the year ended December 31, 2020, Ann Co. total sales are €700,000. Management of the company estimates that 1% of credit sales will Allowances for Doubtful Accounts is a debit balance of €1,250. The Accounts Receivable bal realizable value of Accounts Receivable reported on the statement of financial position at December 31. 2020 is ollectible. The existing balance in the 31. 2020 is €68,400. The cash 1. O€75.400 2 O€61,250. 3.N0€60,150. 4.D€62,650. Nextarrow_forward12.10 Doubtful debts – ageing method * LO3 On 1 June, McLean, Roberts and Associates had Accounts Receivable and Allowance for Doubtful Debts accounts as set out below. Ignore GST. Accounts Receivable 1/6 Balance 847 000 Allowance for Doubtful Debts 1/6 Balance 12 250 During June, the following transactions occurred: 1. fees earned on credit, $1 200 000 2. fees refunded, $25 000 3. accounts receivable collected, $1450 000 4. accounts written off as uncollectable, $14 740. Based on an ageing of accounts receivable on 30 June, the firm decided that the Allowance for Doubtful Debts account should have a credit balance of $13 000 on the balance sheet as at 30 June. Required (a) Prepare general journal entries to record the four transactions above and to adjust the Allowance for Doubtful Debts account. (b) Show how accounts receivable and the allowance for doubtful debts would appear on the balance sheet at 30 June. (c) On 29 July, Blundell Ltd, whose $1870 account had been written off as…arrow_forwardObLO 8-2 10-8-2 A-BOL E8-3 Recording, Reporting, and Evaluating a Bad Debt Estimate Using the Percentage of Credit Sales Method nga 105 During the year ended December 31, 2021, Kelly's Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2021, Accounts Receivable showed a $10,000 debit balance and the Allowance for Doubtful Accounts showed a $600 credit balance. Collections of accounts receivable during 2021 amounted to $68,000. Data during 2021 follow: a. b. On December 10, a customer balance of $1,500 from a prior year was determined to be uncol- lectible, so it was written off. DesthomA betelumu.A 1. 2. On December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year. Required: Give the required journal entries for the two events in December. inomials Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet…arrow_forward
- LO 5 Calistoga Produce estimates bad debt expense at 0.30% of credit sales. The company reported accounts receivable and allowance for uncollectible accounts of $489,000 and $1,470 respectively, at December 31, 2023. During 2024, Calistoga's credit sales and collections were $335,000 and $306.000, respectively, and $1,870 in accounts receivable were written off. Calistoga's final balance in its allowance for uncollectible accounts at December 31, 2024, is: Multiple Choice O O O O $605. $1,255 $1,490. $510.arrow_forwardProblem 7-12 (Algo) Accounts and notes receivable; discounting a note receivable; receivables turnover ratio financial statement effects [LO7-5, 7-6, 7-7, 7-8, 7-9] Chamberlain Enterprises incorporated reported the following receivables in its December 31, 2024, year-end balance sheet: Current assets: accounts Accounts receivable, net of $37,000 in allowance for uncollectible $ 283,000 11,050 390,000 Interest receivable Notes receivable Additional Information: 1. The notes receivable account consists of two notes, a $65,000 note and a $325,000 note. The $65,000 note is dated October 31, 2024, with principal and interest payable on October 31, 2025. The $325,000 note is dated June 30, 2024, with principal and 6% Interest payable on June 30, 2025. 2. During 2025, sales revenue totaled $1,470,000, $1,345,000 cash was collected from customers, and $35,000 in accounts receivable were written off. All sales are made on a credit basis. Bad debt expense is recorded at year-end by adjusting the…arrow_forward8:15 ull 4G O AA Not Secure – moodle.kent.edu.au BE9-3 During its first year of operations, Gavin Company had credit sales of $3,000,000; $600,000 remained uncollected at year-end. The credit manager estimates that $31,000 of these receivables will become uncollectible. (a) Prepare the journal entry to record the estimated uncollectibles. (b) Prepare the current assets section of the balance sheet for Gavin Company. Assume that in addition to the receivables it has cash of $90,000, inventory of $130,000, and prepaid insurance of $7,500. BE9-4 At the end of 2017, Carpenter Co. has accounts receivable of $700,000 and an allowance for doubtful accounts of $54,000. On January 24, 2018, the company learns that its receivable from Megan Gray is not collectible, and management authorizes a write-off of $6,200. (a) Prepare the journal entry to record the write-off. (b) What is the cash realizable value of the accounts receivable (1) before the write-off and (2) after the write-off? BE9-7…arrow_forward
- i li, quiz2 allowance f... -> QUIZ 2 ACCOUNT RECEIVABLE: 09.20 – 10.10.50 WIB 1. Jolly Co. has an allowance account with a debit balance $1,000. Prepare the journal entry to record the following bad debt expense at: a. at 3% of credit sales of $475,000 b. at 6% of accounts receivable whole balance is $120,000 c. Show the allowance account balance after the above entry has been made for both parts a and b. 2. Colde Inc. has the following transactions: Jan 07, 2020 Made sales on credit for $555,000 May 13, 2020 Collect its account receivable from Akira Co. $70,000 on account Dec 31, 2020 Estimate bad debts at 5% of the accounts receivable balance. At this point the allowance account has a credit balance of $2,500 Feb 12, 2021 Write off Mr. Kal for $1,000 Apr 22, 2021 Reinstated the account of Mr. Right and received $3,300 payment on cash Instruction: Prepare the journal entries! Show the necessary computations 3. An aging schedule of the accounts receivable of December 31, 2020 is as…arrow_forwardE6-9 Recording Bad Debt Expense Estimates and Write-Offs Using the Percentage of Credit Sales Method LO6-2 During the current year, Witz Electric, Inc., recorded credit sales of $1,300,000. Based on prior experience, it estimates a 1 percent bad debt rate on credit sales. Required: Prepare journal entries for each transaction: a. On September 29 of the current year, an account receivable for $4,000 from March of the current year was determined to be uncollectible and was written off. b. The appropriate bad debt expense adjustment was recorded for the current year.arrow_forward1 Calculate, record, post, and analyze the adjustment to recognize bad debt expense under the following information provided: Account DR CR Accounts receivable Allowance for doubtful accounts 365,000 15,000 Net credit sales 827,000 Amount % Estimated Total Estimated Number of Days Outstanding Receivable Uncollectible Uncollectible 0-30 175,000 1.00% 31-60 80,000 2.00% 61-90 50,000 42,000 18,000 5.00% Page 1 91-120 20.00% Over 120 40.00% TOTALS 365,000 Page 2 General Ledger Accounts Receivable A Allowance for Doubtful XA Bad Debt Expense E Debit Credit Debit Credit Debit Credit Transaction Analysis ASSETS LIABILITIES EQUITY REVENUES EXPENSES NET INCOME + General Journal DR CR 2 What is the net realizable value of Accounts receivable?arrow_forward
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