The controller of Yamato Inc. is in the process of computing the bad debt expense for 2022. Unfortunately, a computer virus attacked Yamato’s accounting system one night and destroyed the information regarding the approach that Yamato has consistently used for computing the uncollectible accounts expenses for the past 3 years. However the following information is provided by the credit manager.

	2020	2021	2022
Accounts receivable, December 31	$148,600	$152,500	$150,500
Allowance for doubtful accounts (credit balance), Dec. 31	40,500	42,500	44,500
Accounts receivable written off during the year	21,500	27,000	23,000
Sales*: Cash	325,000	305,000	350,000
Credit	521,000	580,000	500,000

* Yamato uses the perpetual inventory system and its cost of goods sold is 45% of the sales.

The credit manager explains that the large write off in 2021 was due to an unexpected bankruptcy of a major customer even though the age distribution of accounts receivable has been very consistent over the past three years.

Required:

1. Calculate the following items:

(a) the bad debt expense amount for 2021.

(b) the bad debt expense amount for 2022.

(c) cash collection from credit sales for 2021.

(d) cash collection from credit sales for 2022.

2. Prepare journal entries to record all the transactions for Yamato Inc. in 2022.
3. During 2023, 8% of the accounts receivable previously written off in 2022 is collected in full. Provide the required journal entries.
4. What are the impact on Assets, Liabilities, Shareholders’ Equity, and Net Earnings, when the uncollectible accounts receivable is written off? Please identify as (1) Increase, (2) Decrease, or (3) No Effect.

Answer rating: 100% (QA)

a the bad debt expense amount for 2021 Allowance for doubtful accounts Dec 31 2021 Allowance for dou... View the full answer