Allowance method entries

Instructions

Chart of Accounts

T-Accounts

Journal

Final Questions

Instructions

The following transactions were completed by Irvine Company during the current fiscal year ended December 31:

Feb. 8	Received 40% of the $18,500 balance owed by DeCoy Co., a bankrupt business, and wrote off the remainder as uncollectible.
May 27	Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,430 cash in full payment of Seths account.
Aug. 13	Wrote off the $6,470 balance owed by Kat Tracks Co., which has no assets.
Oct. 31	Reinstated the account of Crawford Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,870 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,245; Bonneville Co., $5,595; Crow Distributors, $9,500; Fiber Optics, $1,060.
Dec. 31	Based on an analysis of the $1,769,500 of accounts receivable, it was estimated that $35,390 will be uncollectible. Journalized the adjusting entry.

1.

Record the January 1 credit balance of $25,330 in a T-account for Allowance for Doubtful Accounts.

2.

A.	Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.
B.	Post each entry that affects the following selected T-accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.

3.

Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).

4.

Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of of 1% of the net sales of $18,430,000 for the year, determine the following:

A.	Bad debt expense for the year.
B.	Balance in the allowance account after the adjustment of December 31.
C.	Expected net realizable value of the accounts receivable as of December 31.

Chart of Accounts

CHART OF ACCOUNTS

Irvine Company

General Ledger

	ASSETS
110	Cash
111	Petty Cash
121	Accounts Receivable-DeCoy Co.
122	Accounts Receivable-Seth Nelsen
123	Accounts Receivable-Kat Tracks Co.
124	Accounts Receivable-Crawford Co.
125	Accounts Receivable-Newbauer Co.
126	Accounts Receivable-Bonneville Co.
127	Accounts Receivable-Crow Distributors
128	Accounts Receivable-Fiber Optics
129	Allowance for Doubtful Accounts
131	Interest Receivable
132	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Store Equipment
192	Accumulated Depreciation-Store Equipment
193	Office Equipment
194	Accumulated Depreciation-Office Equipment

	LIABILITIES
210	Accounts Payable
211	Salaries Payable
213	Sales Tax Payable
214	Interest Payable
215	Notes Payable

	EQUITY
310	Common Stock
311	Retained Earnings
312	Dividends

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Goods Sold
520	Sales Salaries Expense
521	Advertising Expense
522	Depreciation Expense-Store Equipment
523	Delivery Expense
524	Repairs Expense
529	Selling Expenses
530	Office Salaries Expense
531	Rent Expense
532	Depreciation Expense-Office Equipment
533	Insurance Expense
534	Office Supplies Expense
535	Store Supplies Expense
536	Credit Card Expense
537	Cash Short and Over
538	Bad Debt Expense
539	Miscellaneous Expense
710	Interest Expense

T-Accounts

1.

Record the January 1 credit balance of $25,330 in a T-account for Allowance for Doubtful Accounts.

2.

B.	Post each entry that affects the following selected T-accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.

Allowance for Doubtful Accounts
Feb. 8		Jan. 1 Balance
Aug. 13		May 27
Dec. 31		Oct. 31
		Dec. 31 Adjusting Entry
Dec. 31 Unadjusted Balance		Dec. 31 Adj. Balance

Bad Debt Expense
Dec. 31 Adjusting Entry

Journal

2. A. Journalize the transactions. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

ACCOUNTING EQUATION

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