Concept explainers
(a)
Allowance method
It is a method for accounting
Accounts receivable:
Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.
Write-off:
Write-off refers to deduction of a certain amount from accounts receivable, when it becomes uncollectible.
To prepare: The
(b)
To calculate: The cash realizable value before write-off as well as after write-off.
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Chapter 8 Solutions
Financial Accounting: Tools For Business Decisionmaking, Eighth Edition Wileyplus Blackboard Card
- At the end of 2016, Splish Brothers Inc. has accounts receivable of $675,100 and an allowance for doubtful accounts of $24,370. On January 24, 2017, it is learned that the company’s receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,127.(a) Prepare the journal entry to record the write-offarrow_forwardAt the end of 2016, Skysong, Inc. has accounts receivable of $768,300 and an allowance for doubtful accounts of $26,300. 1. On January 24, 2017, it is learned that the company's receivable from Madonna Inc. is not collectible and therefore management authorizes a write-off of $4,480. 2. On March 4, 2017, Skysong, Inc. receives payment of $4,480 in full from Madonna Inc. Prepare the journal entries to record this transaction. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1. 2. (To record recovery of accounts receivable.) (To record collection of accounts receivable.)arrow_forwardThe following transactions occurred for Salamon Co. in 2021. The beginning balance of Accounts Receivable is $200,000 and Allowance for Doubtful Accounts (ADA) has a credit balance of $10,000. Salamon recorded sales on account of $750,000. Salamon recorded cash sales of $270,000. Salamon Co. wrote off $8,000 of accounts receivable from Haar Co. that became uncollectible. Salamon Co. uses the allowance method. Salamon collected $625,000 of accounts receivable due. Salamon wrote off $2,500 of receivables from Starr that became uncollectible. Haar repaid Salamon half the amount that had been written off. (2 entries required) a. Prepare journal entries for all the above transactions b. Post the above entries to the T accounts for A/R and ADA and calculate the ending balance of each account. c. Based on the above transactions, if Salamon wants an adjusted ending balance in ADA of $14,000, prepare the necessary year end adjustment.arrow_forward
- At the beginning of 2018 Evan Company had a $1,958 balance in its accounts receivable account and a $448 balance in allowance for doubtful accounts. During 2018, Evan experienced the following events. (1) Earned $4,577 of revenue on account. (2) Collected $1,505 cash from accounts receivable. (3) Wrote-off $339 of accounts receivable as uncollectible. Evan estimates uncollectible accounts to be 3% of sales. Based on this information, the December 31, 2018 adjusted balance in the allowance for doubtful accounts isarrow_forwardDuring August 2024, Helio Company recorded the following: • Sales of $91,400 ($77,000 on account, $14,400 for cash). Ignore Cost of Goods Sold • Collections on account, $63,700. • Write-offs of uncollectible receivables, $1,680. • Recovery of receivable previously written off, $700. Requirements Journalize Helio's transactions during August 2024, assuming Helio uses the direct write-off method. 1. 2. Journalize Helio's transactions during August 2024, assuming Helio uses the allowance method.arrow_forwardOn January 1, 2018, Keiasia Company’s Accounts Receivable and the Allowance for Uncollectible Accounts showed balances of $24,000 and $1,200 respectively. During the year, the company reported $64,000 of credit sales, and cash collections of receivables amounted to $58,000. During the year, the company wrote of $1,400 of delinquent accounts. The company estimates that it will be unable to collect 5% of the year-end accounts receivable balance. The amount of bad debts expense recognized in the 2018 income statement will be: A. $1,230 B. $1,630 C. $230 D. $500 Answer is B, how do you get to 1,630arrow_forward
- During August 2024, Texit Company recorded the following: • Sales of $37,000 ($22,000 on account: $15,000 for cash). Ignore Cost of Goods Sold. • Collections on account, $11,800. • Write-offs of uncollectible receivables, $1,480. • Recovery of receivable previously written off, $600. Requirements Journalize Texit's transactions during August 2024, assuming Texit uses the direct write-off method. Journalize Texit's transactions during August 2024, assuming Texit uses the allowance method. 1. 2.arrow_forwardDuring August 2024, Texit Company recorded the following: • Sales of $37,000 ($22,000 on account; $15,000 for cash). Ignore Cost of Goods Sold. • Collections on account, $11,800. • Write-offs of uncollectible receivables, $1,480. • Recovery of receivable previously written off, $600. C Requirements Journalize Texit's transactions during August 2024, assuming Texit uses the direct write-off method. Journalize Texit's transactions during August 2024, assuming Texit uses the allowance method. 1. 2. Requirement 1. Journalize Texit's transactions during August 2024, assuming Texit uses the direct write-off method. Sales of $37,000 ($22,000 on account; $15,000 for cash). Ignore Cost of Goods Sold. (Record debits first, then credits. Select the explanation on the last line of the journal entry table. Prepare a single compound journal entry.) Credit Accounts and Explanation Debit Date Aug.arrow_forwardDelta Company uses the allowance method of recording credit losses. In November 2016, Delta wrote off the $1,800 account of Epsilon Company. In January 2017, Epsilon paid the $1,800. The entry or entries to record the payment is/are: Cash Recoveries of Accounts Written Off Accounts Receivable--Epsilon Co. Cash Allowance for Doubtful Accounts Accounts Receivable--Epsilon Co. 1,800 1,800 1,800 1,800 1,800 1,800 Allowance for Doubtful Accounts 1,800 Accounts Receivable--Epsilon 1,800 Co. ☐ Accounts Receivable--Epsilon Co. 1,800 Bad Debts Expense 1,800arrow_forward
- On December 31, 2017, Extreme Fitness has adjusted balances of $800,000 in Accounts Receivable and $55,000 in Allowance for Doubtful Accounts. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $10,000. What amount would the company report as its net accounts receivable on December 31, 2017? Prepare the journal entry to write off the accounts on January 2, 2018. Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018? Has net accounts receivable changed from December 31, 2017?arrow_forwardCortez Co. had accounts receivable totalling $450,000 and an allowance for doubtful accounts with a balance of $5,000 on June 1, 2018. On June 2 Cortez wrote off $2,400 of uncollectible accounts. The net carrying value of accounts receivable before and after the write-off was Multiple Choice Before $445,000 | After $442,600 Before $450,000 | After $450,000 Before $445,000 | After $445,000 Before $450,000 | After $445,000 Before $450,000 | After $447,600arrow_forwardThe following information is related to December 31, 2024 balances. ● Accounts receivable Allowance for doubtful accounts (credit) Cash realizable value $1570000 (111000) 1459000 During 2025 sales on account were $375000 and collections on account were $230000. The company wrote off $23000 in uncollectible accounts. An analysis of outstanding receivable accounts at year end indicated that uncollectibles should be estimated at $144000. The change in the cash realizable value from 12/31/24 to 12/31/25 wasarrow_forward
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