Allowance Methodfor Doubtful Accounts

Averys All-Natural Company supplies wigs and hair care products to beauty salons throughout Texas and the Southwest. The accounts receivable clerk for Averys All-Natural prepared the following aging-of-receivables schedule as of the end of business on December 31, 20Y7:

Days Past DueCustomerBalanceNot Past

Due1-3031-6061-9091-120Over 120AAA Beauty27,50027,500Amelia's Wigs3,7503,750Zim's Beauty1,6501,650Totals 1,100,000750,000180,00075,00045,00022,00028,000

Averys All-Natural Company has a past history of uncollectible accounts by age category, as follows:

Age ClassPercent

UncollectibleNot past due1%1-30 days past due331-60 days past due761-90 days past due1691-120 days past due40Over 120 days past due90

Assume that the allowance for doubtful accounts for Averys All-Natural Company has a negative balance of $(2,250) before adjustment on December 31, 20Y7. Illustrate the effect on the accounts and financial statements of the adjustment for uncollectible accounts.

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

Balance sheet totals?

Averys All-Natural Company reported credit sales of $2,400,000 during 20Y7. Assume that instead of using the analysis of receivables method of estimating uncollectible accounts, Natural Hair Company uses the percent of sales method and estimates that 2.5% of sales will be uncollectible. Illustrate the effect on the accounts and financial statements of the adjustment for uncollectible accounts using the percent of sales method.

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. balance sheet totals?

Assume that on March 4, 20Y8, Averys All-Natural wrote off the $2,950 account of Superior Images as uncollectible. Illustrate the effect on the accounts and financial statements of the write-off of the Superior Images account.

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Balance sheet totals?

Assume that on August 17, 20Y8, Superior Images paid $2,950 on its account. Illustrate the effect on the accounts and financial statements of reinstating and collecting the Superior Images account.

(a) Reinstatement

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Balance sheet totals?

(b) Collection

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Balance sheet totals?

Assume that instead of using the allowance method, Averys All-Natural uses the direct writeoff method. Illustrate the effect on the accounts and financial statements of the following:

a.The write-off of the Superior Images account on March 4, 20Y8.

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts Balance sheet totals?

b.The (1) reinstatement and (2) collection of the Superior Images account on August 17, 20Y8.

(1) reinstatement

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. balance sheet totals?

(2) collection

If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. Balance sheet totals?