Allowance method entries

The following transactions were completed by Wild Trout Gallery during the current fiscal year ended December 31:

Jan. 19. Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalize the receipt of $2,305 cash in full payment of Arlenes account.

Apr. 3. Wrote off the $13,210 balance owed by Premier GS Co., which is bankrupt.

July 16. Received 30% of the $23,700 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible.

Nov. 23. Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,755 cash in full payment.

Dec. 31. Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $9,935 ; Fogle Co., $2,950 ; Lake Furniture, $ 7,585 ; Melinda Shryer, $2,145.

Dec. 31. Based on an analysis of the $1,168,400 of accounts receivable, it was estimated that $50,800 will be uncollectible. Journalize the adjusting entry.

Required:

1. Record the January 1 credit balance of $48,400 in a T account presented below in requirement 2b for Allowance for Doubtful Accounts.

2. a. Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,168,400 balance in accounts receivable reflects the adjustments made during the year.

Jan. 19-reinstate

Accounts Receivable-Arlene Gurley

Allowance for Doubtful Accounts

Jan. 19-collection

Cash

Accounts Receivable-Arlene Gurley

Apr. 3

Allowance for Doubtful Accounts

Accounts Receivable-Premier GS Co.

July 16

Cash

Allowance for Doubtful Accounts

Accounts Receivable-Hayden Co.

Nov. 23-reinstate

Accounts Receivable-Harry Carr

Allowance for Doubtful Accounts

Nov. 23-collection

Cash

Accounts Receivable-Harry Carr

Dec. 31-write-off

Allowance for Doubtful Accounts

Accounts Receivable-Cavey Co.

Accounts Receivable-Fogle Co.

Accounts Receivable-Lake Furniture

Accounts Receivable-Melinda Shryer

Dec. 31-adjusting

Bad Debt Expense

Allowance for Doubtful Accounts

Feedback

Set up T accounts.

Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.

In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.

The amount of bad debt expense is affected by the balance in the allowance account.

Learning Objective 4.

2. b. Post each entry that affects the following T accounts and determine the new balances:

Allowance for Doubtful Accounts

Apr. 3

Jan. 1 Balance

July 16

Jan. 19

Dec. 31

Nov. 23

Dec. 31 Unadjusted Balance

Dec. 31 Adjusting Entry

Dec. 31 Adjusted Balance

Bad Debt Expense

Dec. 31 Adjusting Entry

Feedback

Set up T accounts.

Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable.

In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account.

The amount of bad debt expense is affected by the balance in the allowance account.

Learning Objective 4.

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 sales of $7,210,000 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 (after all of the adjustments and the adjusting entry).

$