1.
Concept Introduction:
Direct write-off method: Uncollectible are written off and bad debt expenses are recorded when the business determines that it may not be able to collect from a specific customer. Sometimes after the write-off, bad debt is recovered. The company must reverse the earlier write-off.
The effect on net income for 2024 when PP applies the allowance method for
2.
Concept Introduction:
Direct write-off method: Uncollectible are written off and bad debt expenses are recorded when the business determines that it may not be able to collect from a specific customer. Sometimes after the write-off, bad debt is recovered. The company must reverse the earlier write-off.
The amount of receivable balance PP is expected to collect at the end of 2024.
3.
Concept Introduction:
Direct write-off method: Uncollectible are written off and bad debt expenses are recorded when the business determines that it may not be able to collect from a specific customer. Sometimes after the write-off, bad debt is recovered. The company must reverse the earlier write-off.
The effect on net income under the allowance method versus the direct write-off method.
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HORNGREN'S FINAN.+MNGRL...:FINAN.CHAP.
- Your client is preparing financial statements to show the bank. You know that he has incurred a refrigeration repair expense during the month, but you see no such expense on the books. When you question the client, he tells you that he has not yet paid the 1,255 bill. Your client is on the accrual basis of accounting. He does not want the refrigeration repair expense on the books as of the end of the month because he wants his profits to look good for the bank. Is your client behaving ethically by suggesting that the refrigeration repair expense not be booked until the 1,255 is paid? Are you behaving ethically if you agree to the clients request? What principle is involved here?arrow_forwardAron Larson is a customer of Bank Enterprises. Mr. Larson took out a loan in the amount of $120,000 on August 1. On December 31, Bank Enterprises determines the loan to be uncollectible. Larson had not paid anything toward the balance due on account. What is the journal entry recording the bad debt write-off?arrow_forwardplease answer these 2 questions. Their pictures are attached as well 1. Under the allowance method, which of the following does not change the balance in the Accounts Receivable account? A) Collections on customer accounts. B) Write-offs. C) Returns on credit sales D) Bad debt expense adjustment. 2. On November 10 of the current year, Flores Mills provides services to a customer for $8,000 with credit terms 2/10, n/30. The customer made the correct payment on November 17. How would Flores record the collection of cash on November 17? A. Cash 7,840 Accounts Receivable. 7,840 B. Cash 7,840 Sales Discount 160 Accounts Receivable 8,000 C. Cash 7,840 Sales Revenue 160 Accounts Receivable 8000 D. Cash 8000 Accounts Receivable 8000arrow_forward
- Minnie has asked you to review the methods Min Armin Wastege uses when dealing with Accounts Receivable. Minnie has compiled the following information for the past 2 months and wants you to update her records on August 31, 2020. On June 30, 2020 the Account Receivable balance for Min Armin Wastege was $13,585 Dr with an Allowance for Doubtful Debts of $462 Cr. In the last two months $4 800 Sales (net of GST) Sales Returns & Allowances (net of GST) 400 Cash Collected 3 550 Bad Debts to be written off (Including GST) 660 The bad debts listed above have not been written off as yet. Minnie has also calculated based on past experience that 7% of net credit sales go bad. All sales are made on credit. REQUIRED: A. Prepare the following General Journal entries to 1. account for the write off of the bad debt during the past two months 2. the adjusting entry on August 31 using the information Minnie has provided В. Update the Accounts Receivable and Allowance for doubtful debts accounts using…arrow_forwardProvide the following independent journal entries: a. July 31, 2019. We had $1,000,000 of credit sales in July. We estimate that our bad debt expense will be 1% of credit sales. b. Aug. 15, 2019. We have an account receivable from Frank Farmworker for $500. On Aug. 15 we decide that we will not collect this account, so need to write it off. On Sept. 5 we get a check from Frank in the mail. c. Dec. 31, 2019. Allowance for Bad Debts currently has a credit balance of $7,200. We perform an aging of accounts receivable, and determine that the Allowance should have a balance of $10,100. d. Dec. 31, 2020. We age our accounts receivable: Age of accounts . Days: 1-30 31-60 61-9091+Total Accounts receivable$85,000$40,000$10,000$2,000$137,000 Estimate % uncollectible 1% 5% 20% 60% What balance should the…arrow_forwardA retailer uses the direct write-off method. Record the following transactions. Feb. 14 The retailer determines that it cannot collect $400 of its accounts receivable from a customer named ZZZ Company. Apr. 1 ZZZ Company unexpectedly pays its account in full to the retailer, which then records its recovery of this bad debt.arrow_forward
- Springer Products wishes to borrow $90,000 from a local bank using its accounts receivable to secure the loan. The bank's policy is to accept as collateral any accounts that are normally paid within 30 days of the end of the credit period, as long as the average age of the account is not greater than the customer's average payment period. Springer's accounts receivable, their average ages, and the average payment period for each customer are shown in the following table: Customer Accounts Receivable Average age of account Average payment period of customer A $11,000 42 days 50 days B $25,000 70 days 65 days C $10,000 48 days 45 days D $28,000 55 days 50 days E $14,000 50 days 60 days F $19,000 21 days 35 days G $30,000 10 days 30 days H $16,000 25 days 40 days…arrow_forwardRead the following information to answer questions 2.1 - 2.2. LA Fashion has credit sales of $6,400,000 for the financial year ending June 30, 2021, and estimates at the end of the financial year that five per cent of accounts receivable will not be received. Accounts receivable total $3,100,000. The corporation uses the allowance method to account for bad debts, based on the percentage of receivables approach.arrow_forwardFor a business that uses the allowance method of accounting for uncollectible receivables: Journalize the entries to record the following: Use correct journal format. Just use the month for the date. Record the adjusting entry at December 31, the end of the first fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $850,000, and the contra asset account before adjustment has a debit balance of $4000. Analysis of the receivables (aging) indicates uncollectible receivables of $17,200. In March of the next year, the $720 owed by Fronk Co. on account is written off as uncollectible. In November of the next year, $400 of the Fronk Co. account 1s reinstated and payment of that amount is received. In December of the next year, $250 is received on the $800 owed by Dodger Co. and the remainder is written off as uncollectible.arrow_forward
- Gideon Company uses the allowance method of accounting for uncollectible accounts. On May 3, Gideon Company wrote off the $2,000 uncollectible account of its customer, A. Hopkins. On July 10, Gideon received a check for the full amount of $2,000 from Hopkins. The entry or entries Gideon makes to record the recovery of the bad debt is: Multiple Choice Account Title Credit Accounts Receivable-A. Hopkins Debit 2,000 Allowance for Doubtful Accounts 2,000 Cash 2,000 Accounts Receivable-A. Hopkins 2,000 Account Title Debit Credit Cash 2,000 Accounts Receivable-A. Hopkins 2,000 Account Title Debit Credit Accounts Receivable-A. Hopkins 2,000 Bad debts expense 2,000arrow_forwardYou are the accountant for Black Cat Ltd. (BCL) and you have just finished the aging analysis of accounts receivable. You have estimated that $5,000 of the current $98,000 of A/R will be uncollectible. The allowance for doubtful accounts had a $400 credit balance at year-end before adjustment. What amount of bad debts would you expect to see on BCL's income statement for the year? a. $0 b. $4,600 c. $5,000 d. $5,400arrow_forwardAt the beginning of Year 1, a company has a balance of $24,800 in accounts receivable. Because the company is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of Year 1, the company wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that the company now will need to use the allowance method. The following transactions occur during Year 1 and Year 2. 1. During Year 1, install air conditioning systems on account, $178,000. 2. During Year 1, collect $173,000 from customers on account. 3. At the end of Year 1, estimate that uncollectible accounts total 20% of ending accounts receivable. 4. In Year 2, customers' accounts totaling $6,800 are written off as uncollectible. 2. Record each transaction using the direct write-off method. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the…arrow_forward
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