Chapter 8 -Receivables The Allowance balance is a $200 credit before adjustment. Uncollectible accounts are estimated to be $2,000. The adjusting entry to record uncollectible accounts is: If the Allowance balance started with a \$200 DEBIT balance and uncollectible accounts are estimated to be $2,000. Now, the adjusting entry to record uncollectible accounts is: GENERAL JOURNAL Note: Bad Debt Expense estimate in the prior year was wrong, it was not an error. It was still a good faith estimate and the apparent violation of the matching principle is allowed under GAAP. At the end of the current year, the accounts receivable account has a debit balance of $1,400,000 and sales for the year total $15,350,000. Determine the amount of the adjustment needed. a. The allowance account before adjustment has a debit balance of $23,000. Bad debt expense is estimated at 3/4 of 1% of sales. b. The allowance account before adjustment has a debit balance of $23,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $125,000. Note: Bad Debt Expense estimate in the prior year was wrong, it was not an error. It was still a good faith estimate and the apparent violation of the matching principle is allowed under GAAP. At the end of the current year, the accounts receivable account has a debit balance of $1,400,000 and sales for the year total $15,350,000. Determine the amount of the adjustment needed. a. The allowance account before adjustment has a debit balance of $23,000. Bad debt expense is estimated at 3/4 of 1% of sales. b. The allowance account before adjustment has a debit balance of $23,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $125,000. c. The allowance account before adjustment has a credit balance of $14,500. Bad debt expense is estimated at 1/2 of 1% of sales. d. The allowance account before adjustment has a credit balance of $14,500. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $180,000. Selby's Bike Co. is a wholesaler of motorcycle supplies. An aging of the company's accounts receivable on December 31, 2019, and a historical analysis of the percentage of uncollectible accounts in each age categorv are as follows: Page 3 Accounting 1A Class Assignment Chapter 8 -Receivables Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31, 2019. Selby's Bike Co. has determined that the proper balance for the Allowance for Doubtful Accounts at December 31 is $76,475. Assume that the allowance for doubtful accounts for Selby's Bike Co. had a debit balance of $7,200 as of December 31, 2019. Reinstated a written-off Account 1. Reinstate the receivable 2. Receive the cash against it. Reason: For control purposes, the person who receives and records Cash Receipts is not the person with authority to Write-off Receivables. Likely a manager is reinstating the receivable and the Cash Receipts clerk is recording the cash receipt. Reinstated a written-off Account 1. Reinstate the receivable 2. Receive the cash against it. Reason: For control purposes, the person who receives and records Cash Receipts is not the person with authority to Write-off Receivables. Likely a manager is reinstating the receivable and the Cash Receipts clerk is recording the cash receipt. Step 1: The account must be reinstated. Step 2: The cash received is recorded. Page 4
