D. Cicero Corp for 2021: Total Sales on account during 2021 2,000,000 Customer Accounts written off during 2021 $36,000 (this includes Velo Inc.'s balance of $2,000 (wee 4. & 5.)) A/R, Gross as of 12/31/2021 $800,000 (assume this BOY balance regardless of info presented below) Instructions: unless otherwise indicated, assume cach item is an independent situation 1. What amount of Bad Debts Expense will Cicero Corp. report for 2021 if it uses the specific charge-off method to account for bad debts? 2. What are the weaknesses in using the specific charge-off method of reporting Bad Debts Expense? 3. Assume Cicero Corp. employs the theoretically better allowance method for recording Bad Debt Expense. Also assume the January 1, 2021 balance in Allowance for Doubtful Accounts(AFDA) is $40,000. (a) What is the 12/31/21 Unadjusted Balance in AFDA? (b) Did management overestimate or underestimate actual write-offs for 2021? 4. Assume Cicero Corp. employs the allowance method for Bad Debts. While owing Cicero $2,000, Velo Inc, filed for bankruptcy on January 21, 2021. As a result of bankruptcy the $2,000 is uncollectable. Prepare a journal entry on Jan. 21, 2021 to write-off Velo's $2,000 uncollectible account. 5. Assume that on the morning of Jan. 21, 2021 "A/R, Gross" is at $750,000 and that "AFDA" is still at $40,000. (a) Calculate Net Accounts Receivable before the journal entry in (4). Note: The entry in (4) above should be: debit "AFDA" and credit "A/R, Velo Inc." for $2,000. (b) Calculate Net Accounts Receivable after the journal entry in (4)? 6. End of Year 2021: Assume that Cicero Corp, reports Bad Debt Expense as 3% of sales on account. Cicero Corp. has a 12/31/21 unadjusted balance in AIDA of $4,000 (a) Is Cicero using a B/S or 1/S approach? (b) Prepare the necessary AJE. (c) What dollar amount will Cicero report as Bad Debt Expense for 2021? 7. Assume that Cicero Corp. reports AfDA based on 6% of A/R. Cicero Corp. has a 12/31/21 unadjusted balance in ADA of $4,000. (a) Is Cicero using a B/S or I/S approach? (b) Prepare the necessary AJE. (c) What dollar amount of Bad Debt Expense will Cicero Corp. report for 2021? 8. Assume the same facts as in (7), except the beginning balance in Allowance for Doubtful Accounts was $30,000; thus there is an unadjusted balance of $6,000 in AfDA. (a) Did management overestimate or underestimate actual write-offs for 2021? (b) Prepare the necessary AJE. (c) What dollar amount of Bad Debts Expense will Cicero Corp. report for 2021? 488 D. Cicero Corp for 2021: Total Sales on account during 2021 2,000,000 Customer Accounts written off during 2021 $36,000 (this includes Velo Inc.'s balance of $2,000 (wee 4. & 5.)) A/R, Gross as of 12/31/2021 $800,000 (assume this BOY balance regardless of info presented below) Instructions: unless otherwise indicated, assume cach item is an independent situation 1. What amount of Bad Debts Expense will Cicero Corp. report for 2021 if it uses the specific charge-off method to account for bad debts? 2. What are the weaknesses in using the specific charge-off method of reporting Bad Debts Expense? 3. Assume Cicero Corp. employs the theoretically better allowance method for recording Bad Debt Expense. Also assume the January 1, 2021 balance in Allowance for Doubtful Accounts(AFDA) is $40,000. (a) What is the 12/31/21 Unadjusted Balance in AFDA? (b) Did management overestimate or underestimate actual write-offs for 2021? 4. Assume Cicero Corp. employs the allowance method for Bad Debts. While owing Cicero $2,000, Velo Inc, filed for bankruptcy on January 21, 2021. As a result of bankruptcy the $2,000 is uncollectable. Prepare a journal entry on Jan. 21, 2021 to write-off Velo's $2,000 uncollectible account. 5. Assume that on the morning of Jan. 21, 2021 "A/R, Gross" is at $750,000 and that "AFDA" is still at $40,000. (a) Calculate Net Accounts Receivable before the journal entry in (4). Note: The entry in (4) above should be: debit "AFDA" and credit "A/R, Velo Inc." for $2,000. (b) Calculate Net Accounts Receivable after the journal entry in (4)? 6. End of Year 2021: Assume that Cicero Corp, reports Bad Debt Expense as 3% of sales on account. Cicero Corp. has a 12/31/21 unadjusted balance in AIDA of $4,000 (a) Is Cicero using a B/S or 1/S approach? (b) Prepare the necessary AJE. (c) What dollar amount will Cicero report as Bad Debt Expense for 2021? 7. Assume that Cicero Corp. reports AfDA based on 6% of A/R. Cicero Corp. has a 12/31/21 unadjusted balance in ADA of $4,000. (a) Is Cicero using a B/S or I/S approach? (b) Prepare the necessary AJE. (c) What dollar amount of Bad Debt Expense will Cicero Corp. report for 2021? 8. Assume the same facts as in (7), except the beginning balance in Allowance for Doubtful Accounts was $30,000; thus there is an unadjusted balance of $6,000 in AfDA. (a) Did management overestimate or underestimate actual write-offs for 2021? (b) Prepare the necessary AJE. (c) What dollar amount of Bad Debts Expense will Cicero Corp. report for 2021? 488