Ch 8

Entries Related to Uncollectible Accounts

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

Mar. 15.	Reinstated the account of Brad Atwell, which had been written off in the preceding year as uncollectible. Journalized the receipt of $2,500 cash in full payment of Brads account.
May 20.	Wrote off the $14,330 balance owed by Glory Rigging Co., which is bankrupt.
Aug. 13.	Received 30% of the $25,700 balance owed by Coastal Co., a bankrupt business, and wrote off the remainder as uncollectible.
Sept. 2.	Reinstated the account of Lorie Kidd, which had been written off two years earlier as uncollectible. Recorded the receipt of $4,075 cash in full payment.
Dec. 31.	Wrote off the following accounts as uncollectible (compound entry): Kimbro Co., $10,775; McHale Co., $3,200; Summit Furniture, $8,225; Wes Riggs, $2,325.
Dec. 31.	Based on an analysis of the $1,267,300 of accounts receivable, it was estimated that $55,100 will be uncollectible. Journalized the adjusting entry.

Required:

1. Record the January 1 credit balance of $52,500 in a T account (below) for Allowance for Doubtful Accounts.

2. a.Journalize the transactions. For a compound transaction, if an amount box does not require an entry, leave it blank. Note: For the December 31 adjusting entry, assume the $1,267,300 balance in accounts receivable reflects the adjustments made during the year.

Mar. 15-reinstate	Accounts Recievable-Brad Atwell	2,500
	Allowance for Doubtful Account		2,500
Mar. 15-collection	Cash	2,500
	Accounts Recievable Brad Atwell		2,500
May 20	Allowance for Doubtful Account	14,330
	Accounts Recievable-Glory Riggs		14,330
Aug. 13	Cash	7,710
	Allowance for Doubtful Account	17,990
	Accounts Recievable-Coastal Co.		25,700
Sept. 2-reinstate	Accounts Recievable-Lorie Kidd	4,075
	Allowance for Doubtful Account		4,075
Sept. 2-collection	Cash	4,075
	Accounts Recievable-Lorie Kidd		4,075
Dec. 31-write-off	Allowance for Doubtful Account	27,725
	Notes Receivable		10,775
	Accounts Recievable-McHale Co.		3,200
	Notes Receivable		8,225
	Notes Receivable		2,325
Dec. 31-adjusting	Bad Debt Expense	64,020
	Allowance for Doubtful Account		64,020

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

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 $7,820,000 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). $ _________

2. b. Post each entry that affects the following T accounts and determine the new balances: Allowance for Doubtful Accounts Sept. 2 Dec. 31 Adjusting Entry Dec. 31 Jan. 1 Balance Select Select Select Select Dec. 31 Adjusted Balance Bad Debt Expense Dec. 31 Adjusting Entry