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 $2,790 cash in full payment of Arlenes account.
Apr. 3.	Wrote off the $15,990 balance owed by Premier GS Co., which is bankrupt.
July 16.	Received 25% of the $28,700 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 $4,550 cash in full payment.
Dec. 31.	Wrote off the following accounts as uncollectible (compound entry): Cavey Co., $12,025 ; Fogle Co., $3,570 ; Lake Furniture, $ 9,180 ; Melinda Shryer, $2,595.
Dec. 31.	Based on an analysis of the $1,414,500 of accounts receivable, it was estimated that $61,500 will be uncollectible. Journalize the adjusting entry.

Required:

1. Record the January 1 credit balance of $58,600 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 $1,414,500 balance in accounts receivable reflects the adjustments made during the year.

Jan. 19-reinstate	Accounts Payable-Arlene GurleyAccounts Receivable-Arlene GurleyAllowance for Doubtful AccountsBad Debt ExpenseInterest ReceivableNotes ReceivableAccounts Receivable-Arlene Gurley	Accounts Receivable-Arlene Gurley
	Accounts Payable-Arlene GurleyAccounts Receivable-Arlene GurleyAllowance for Doubtful AccountsBad Debt ExpenseInterest ReceivableNotes ReceivableAllowance for Doubtful Accounts		Allowance for Doubtful Accounts
Jan. 19-collection	Accounts Payable-Arlene GurleyAccounts Receivable-Arlene GurleyAllowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableCash	Cash
	Accounts Payable-Arlene GurleyAccounts Receivable-Arlene GurleyAllowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableAccounts Receivable-Arlene Gurley		Accounts Receivable-Arlene Gurley
Apr. 3	Accounts Payable-Premier GS Co.Accounts Receivable-Premier GS Co.Allowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableAllowance for Doubtful Accounts	Allowance for Doubtful Accounts
	Accounts Payable-Premier GS Co.Accounts Receivable-Premier GS Co.Allowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableAccounts Receivable-Premier GS Co.		Accounts Receivable-Premier GS Co.
July 16	Accounts Payable-Hayden Co.Accounts Receivable-Hayden Co.Bad Debt ExpenseCashNotes PayableNotes ReceivableCash	Cash	Cash
	Accounts Payable-Hayden Co.Accounts Receivable-Hayden Co.Allowance for Doubtful AccountsBad Debt ExpenseInterest ReceivableNotes ReceivableAllowance for Doubtful Accounts	Allowance for Doubtful Accounts	Allowance for Doubtful Accounts
	Accounts Payable-Hayden Co.Accounts Receivable-Hayden Co.Allowance for Doubtful AccountsBad Debt ExpenseInterest ReceivableNotes ReceivableAccounts Receivable-Hayden Co.	Accounts Receivable-Hayden Co.	Accounts Receivable-Hayden Co.
Nov. 23-reinstate	Accounts Payable-Harry CarrAccounts Receivable-Harry CarrAllowance for Doubtful AccountsBad Debt ExpenseCashInterest ReceivableAccounts Receivable-Harry Carr	Accounts Receivable-Harry Carr
	Accounts Payable-Harry CarrAccounts Receivable-Harry CarrAllowance for Doubtful AccountsBad Debt ExpenseCashInterest ReceivableAllowance for Doubtful Accounts		Allowance for Doubtful Accounts
Nov. 23-collection	Accounts Payable-Harry CarrAccounts Receivable-Harry CarrAllowance for Doubtful AccountsBad Debt ExpenseCashInterest ReceivableCash	Cash
	Accounts Payable-Harry CarrAccounts Receivable-Harry CarrAllowance for Doubtful AccountsBad Debt ExpenseCashInterest ReceivableAccounts Receivable-Harry Carr		Accounts Receivable-Harry Carr
Dec. 31-write-off	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableSalesAllowance for Doubtful Accounts	Allowance for Doubtful Accounts	Allowance for Doubtful Accounts
	Accounts Payable-Cavey Co.Accounts Receivable-Cavey Co.Allowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableSalesAccounts Receivable-Cavey Co.	Accounts Receivable-Cavey Co.	Accounts Receivable-Cavey Co.
	Accounts Payable-Fogle Co.Accounts Receivable-Fogle Co.Allowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableSalesAccounts Receivable-Fogle Co.	Accounts Receivable-Fogle Co.	Accounts Receivable-Fogle Co.
	Accounts Payable-Lake FurnitureAccounts Receivable-Lake FurnitureAllowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableSalesAccounts Receivable-Lake Furniture	Accounts Receivable-Lake Furniture	Accounts Receivable-Lake Furniture
	Accounts Payable-Melinda ShryerAccounts Receivable-Melinda ShryerAllowance for Doubtful AccountsBad Debt ExpenseCashNotes ReceivableSalesAccounts Receivable-Melinda Shryer	Accounts Receivable-Melinda Shryer	Accounts Receivable-Melinda Shryer
Dec. 31-adjusting	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCashIncome SummaryBad Debt Expense	Bad Debt Expense
	Accounts PayableAccounts ReceivableAllowance for Doubtful AccountsBad Debt ExpenseCashIncome SummaryAllowance for Doubtful Accounts		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
Jan. 19Apr. 3Nov. 23	fill in the blank fb5039003ff5f84_2	Jan. 1 Balance	fill in the blank fb5039003ff5f84_3
Jan. 19July 16Nov. 23Dec. 31 Adjusting Entry	fill in the blank fb5039003ff5f84_5	Jan. 19Apr. 3July 16	fill in the blank fb5039003ff5f84_7
Jan. 19Nov. 23Dec. 31Dec. 31 Adjusting Entry	fill in the blank fb5039003ff5f84_9	Apr. 3July 16Nov. 23	fill in the blank fb5039003ff5f84_11
		Apr. 3July 16Dec. 31 Unadjusted Balance	fill in the blank fb5039003ff5f84_13
		Apr. 3July 16Dec. 31 Adjusting Entry	fill in the blank fb5039003ff5f84_15
		Dec. 31 Adjusted Balance	fill in the blank fb5039003ff5f84_16

Bad Debt Expense
Dec. 31 Adjusting EntryDec. 31 Unadjusted Balance	fill in the blank fb5039003ff5f84_18

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). $fill in the blank 1c4f00f25037072_1

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 $8,730,000 for the year, determine the following:

a. Bad debt expense for the year. $fill in the blank 1c4f00f25037072_2

b. Balance in the allowance account after the adjustment of December 31. $fill in the blank 1c4f00f25037072_3

c. Expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry). $fill in the blank 1c4f00f25037072_4