Bad Debt Expense, Aging of Accounts Receivable, Percentage of Sales, Journal Entry Sammy's Downtown Properties developed an aged schedule of accounts receivable at the end of each year Sammy's Downtown Properties Aged Schedule of Accounts Receivable Past Due Customer Current 130 Days 3160 Days 6190 Days Over 90 Days Totals Crosby Consultants $120,000 $45,000 $ 3,000 $168,000 Whitemann Company 4,000 18,500 $ 68,000 90,500 Lite Laser Products 29,500 45,700 $13,900 196,900 286,000 Dual Power Industries 31,800 11,100 42,900 Totals $124,000 $74,500 $67,200 $45,700 $276,000 $587,400 The company estimated an allowance for uncollectible accounts based on the following rules Aging Category Allowance Provided Current 4 130 Days Past Due 8 3160 Days Past Due 10 6190 Days Past Due 35 Over 90 Days Past Due 50 Sammy's reported net credit sales of $4,500,000 for the current year We present the company's ending balances of accounts receivable and the allowance for uncollectible accounts below Accounts Receivable Ending Balance 587,400 Allowance for Uncollectible Accounts 120,000 Unadjusted Ending Balance Required a Compute the balance required in the allowance for uncollectible accounts b Prepare the journal entry to record the bad debt provision for the current year c Independent of your answer to part (b), prepare the journal entry to record the bad debt provision for the current year, assuming that the allowance for uncollectible accounts had a $7,435 debit balance d Using your solution to parts (a) through (b), indicate how Sammy's will report its accounts receivable on the company's year end balance sheet e Independent of your answers above, assume that Sammy's uses the percentage of sales method to estimate its bad debt expense Sammy's estimates its bad debt expense as 1 5 of net credit sales What is Sammy's bad debt expense What is Sammy's allowance at the end of the year Compare Sammy's bad debt expense and allowance using the percentage of sales to those estimated under the aging of accounts receivable from parts a and b

The Answer is in the image, click to view ...

Answered step by step

Verified Expert Solution

Link Copied!

Question

1 Approved Answer

Posted on Sep 08, 2024

Bad Debt Expense, Aging of Accounts Receivable, Percentage of Sales, Journal Entry. Sammy's Downtown Properties developed an aged schedule of accounts receivable at the end

Bad Debt Expense, Aging of Accounts Receivable, Percentage of Sales, Journal Entry. Sammy's Downtown Properties developed an aged schedule of accounts receivable at the end of each year.

Sammy's Downtown Properties: Aged Schedule of Accounts Receivable
		Past Due
Customer	Current	130 Days	3160 Days	6190 Days	Over 90 Days	Totals
Crosby Consultants	$120,000	$45,000	$ 3,000			$168,000
Whitemann Company	4,000		18,500		$ 68,000	90,500
Lite Laser Products		29,500	45,700	$13,900	196,900	286,000
Dual Power Industries				31,800	11,100	42,900
Totals	$124,000	$74,500	$67,200	$45,700	$276,000	$587,400

The company estimated an allowance for uncollectible accounts based on the following rules:

Aging Category	Allowance Provided
Current	4%
130 Days Past Due	8%
3160 Days Past Due	10%
6190 Days Past Due	35%
Over 90 Days Past Due	50%

Sammy's reported net credit sales of $4,500,000 for the current year. We present the company's ending balances of accounts receivable and the allowance for uncollectible accounts below:

	Accounts Receivable
Ending Balance	587,400

Allowance for Uncollectible Accounts
	120,000	Unadjusted Ending Balance

Required

a. Compute the balance required in the allowance for uncollectible accounts.

b. Prepare the journal entry to record the bad debt provision for the current year.

c. Independent of your answer to part (b), prepare the journal entry to record the bad debt provision for the current year, assuming that the allowance for uncollectible accounts had a $7,435 debit balance.

d. Using your solution to parts (a) through (b), indicate how Sammy's will report its accounts receivable on the company's year-end balance sheet.

e. Independent of your answers above, assume that Sammy's uses the percentage-of-sales method to estimate its bad debt expense. Sammy's estimates its bad debt expense as 1.5% of net credit sales. What is Sammy's bad debt expense? What is Sammy's allowance at the end of the year? Compare Sammy's bad debt expense and allowance using the percentage of sales to those estimated under the aging of accounts receivable from parts a and b.