Concept explainers
Determining
At the beginning of the year, Tennyson Auto Parts had an
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
3. Compute bad debt expense.
4. Prepare the adjusting entry to record bad debt expense.
(a)
Aging method:
This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.
To calculate:
The post adjustment balance in allowance for doubtful accounts.
Answer to Problem 85APSA
The post adjustment balance in allowance for doubtful accounts is
Explanation of Solution
The Tennyson Auto Parts accounts receivables indicate a total of
Amount |
Proportion expected | |
This is given in the question.
The post adjustment balance in allowance for doubtful accounts for the Tennyson Auto Parts is as follows:
Amount |
Proportion expected | Allowance required |
|
Total |
(b)
Aging method:
This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.
To calculate:
The balance in allowance for doubtful accounts before the adjustment of bad debt.
Answer to Problem 85APSA
The balance in allowance for doubtful accounts before the adjustment of bad debt expense is
Explanation of Solution
The Tennyson Auto Parts has an opening balance in the allowance for doubtful account of
The computation of allowance for doubtful account for Tennyson Auto Parts is as follows:
Allowance for Doubtful Account | |||
Particulars | Amount |
Particulars | Amount |
Write off | Opening Balance | ||
Bad debts | |||
Post adjustment balance |
So, the balance in the account before adjusting the bad debt expense is
(c)
Aging method:
This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.
The computation of bad debt expense.
Answer to Problem 85APSA
The amount of bad debt expense is
Explanation of Solution
The Tennyson Auto Parts has an opening balance in the allowance for doubtful account of
The computation of bad debt expense for Tennyson Auto Parts is as follows:
Allowance for Doubtful Account | |||
Particulars | Amount |
Particulars | Amount |
Write off | Opening Balance | ||
Bad debts | |||
Post adjustment balance |
(d)
Aging method:
This is a method in which the receivables are sorted according to their collectable estimation. This is done on the basis of their outstanding invoices period. Basically, aging means to check the how old an outstanding balance of receivable is present in the books.
The necessary adjusting journal entry for recording the bad debt.
Answer to Problem 85APSA
The necessary journal adjusting entry has been recorded properly.
Explanation of Solution
The Tennyson Auto Parts has an opening balance in the allowance for doubtful account of
The adjusting journal entry for the Tennyson Auto Parts is as follows:
Date | Particulars | Debit ($) | Credit ($) |
Bad debt expense…………………………… Allowance for Doubtful accounts….……(Record the adjusting entry for bad debt estimation) |
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Chapter 5 Solutions
Cornerstones of Financial Accounting
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