Concept explainers
Cho Sportswear: Aged Schedule of Accounts Receivable
Past Due | ||||||
Customer | Current | 1-30 Days | 31-60 Days | 61-90 Days | Over 90 Days | Totals |
Ryoko Design Assosciates | $100,000 | $23,800 | $ 123,800 | |||
Marcy Fashions, Inc | 657,000 | 198,000 | $76,000 | 931,000 | ||
Conory Clothing | $456,000 | $789,412 | 1,245,412 | |||
Lee Womensware | 237,200 | 10,230 | 54,570 | 349,200 | 651,200 | |
Bauer Brands, Ltd. | 100,230 | 76,770 | 41,588 | 19,000 | 237,588 | |
Totals | $1,094,430 | $308,800 | $130,570 | $846,788 | $808,412 | $3,189,000 |
The company estimated an allowance for uncollectible accounts based on the following estimates
Aging Category | Allowance Provided |
Current | 5% |
1 -30 days past due | 9 |
31-60 days past due | 20 |
61-90 days past due | 55* |
Over 90 days past due | 80* |
After a specific review of the company’s accounts receivable, Cho’s credit manager decided to provide a full allowance against all Bauer Brands’ balances that are more than 60 days past due. The percentage allowance is applied to the 61-90 days and over 90 days past due aging categories only after deducting the balances due from Bauer Brands.
Cho reported net credit sales of $45,000,000 for the current year. We present the company’s of accounts receivable and the allowance for uncollectible accounts:
Required
- a. Compute the balance required in the allowance for uncollectible accounts at the end of the year.
- b. Prepare the journal entry to record the bad debt provision for the current year.
- c. Independent of your answer to part (b) prepare the journal entry to record the bad debt provision for the current year assuming that the allowance for uncollectible accounts had a $331,000 debit balance.
- d. In the following year, Cho’s credit management decided to write off all accounts that were over 90 days past due. Prepare the journal entry.
- e. After the write-offs recorded in part (d), assume that Conroy Clothing pays the entire balance due. Prepare the journal entries required to record the subsequent recovery of the Conroy Clothing receivables.
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