Question
Consider the following July transactions for M&T Plumbing Company , whose owner is Michael Thums, July 1: Performed plumbing services for Pasthas for $8,000 on
Consider the following July transactions for M&T Plumbing Company, whose owner is Michael Thums,
July 1: Performed plumbing services for Pasthas for $8,000 on terms 3/10, n/20.
3: M&T Plumbing decides to adopt the allowance method. Uncollectible account expense is estimated at 2% of credit sales.
10: Borrowed money from Bank of America, $10,000, 7% for 180 days.
12: After discussions with Charless Wig Stand, Michael Thums has determined that $225 of the receivable owed to M&T Plumbing will not be collected. Write off this portion of the receivable.
15: Sold goods to WaterCounty for $4,000 on terms 4/10, n/30. Cost of goods sold was $600.
15: Recorded uncollectible account expense estimated at 2% for WaterCounty sale.
28: Sold goods to PlumbPlus, for cash of $1,200 (cost $280).
28: Collected from Charless Wig Stand $225 of receivable previously written off. Reinstated the remaining balance of Charless receivable.
29: Paid cash for utilities of $350.
31: Created an aging schedule for M&T Plumbing for accounts receivable. M&T determined that accounts 120 days old were 2% uncollectible and accounts over 20 days old were 15% uncollectible. Prepared an aging schedule and adjusted the Allowance for uncollectible.
Charless Wig Stand Balance at June 30, 2013 was 1,775.
31: M&T Plumbing prepared all other adjusting entries necessary for July.
Special Considerations,
Here are the balances of the accounts at June 30, 2013. Take into consideration as beginning balances of July.
Cash Debit balance of $73,791
Accounts Receivable Debit balance of $2,000
Inventory Debit balance of $2,541
Requirements,
- Prepared all required journal entries and post them to M&T Plumbings ledger.
- Complete also transactions for July 31.
- Reconcile the Accounts receivable control account to the Accounts receivable subsidiary ledger.
(3 points) The aging of Torme Designs shown below. Calculate the amount of each periodicity range that is deemed to be uncollectible.
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| Est Uncollectible Accts | ||
| Age Interval: | Balance: | Percentage: | Amount: |
| Not past due | 850,000 | 3.50% |
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| 1~30 days past due: | 47,500 | 5.00% |
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| 31~60 days past due: | 21,750 | 10.00% |
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| 61~90 days past due: | 11,250 | 20.00% |
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| 91~180 days past due: | 5,065 | 30.00% |
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| 181~365 days past due: | 2,500 | 50.00% |
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| Over 365 days past due: | 1,145 | 95.00% |
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| Total: | 939,210 |
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b) If the Allowance for Doubtful Accounts has a credit balance of $1,135.00, record the adjusting entry for the bad debt expense for the year.
(2 points) For a business that uses the allowance method of accounting for uncollectible receivables:
| (a) | Journalize the entries to record the following: | ||
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| (1) | Record the adjusting entry at December 31, 2010, the end of the fiscal year, to record the bad debt expense. The accounts receivable account has a balance of $800,000, and the contra asset account before adjustment has a debit balance of $600. Analysis of the receivables indicates uncollectible receivables of $18,000. |
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| (2) | In March, 2011, the $350 owed by Fronk Co. on account is written off as uncollectible. |
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| (3) | In November, 2011, $200 of the Fronk Co. account is reinstated and payment of that amount is received. |
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| (4) | In December, 2011, $400 is received on the $600 owed by Dodger Co. and the remainder is written off as uncollectible. |
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| (b) | Redo the entries in steps (2), (3) and (4) assuming the company uses the direct write-off method. |
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