Entries Related to Uncollectible Accounts

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

Jan. 19.	Reinstated the account of Arlene Gurley, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1,970 cash in full payment of Arlenes account.
Apr. 3.	Wrote off the $11,290 balance owed by Premier GS Co., which is bankrupt.
July 16.	Received 25% of the $20,300 balance owed by Hayden Co., a bankrupt business, and wrote off the remainder as uncollectible.
Nov. 23.	Reinstated the account of Harry Carr, which had been written off two years earlier as uncollectible. Recorded the receipt of $3,210 cash in full payment.
Dec. 31.	Wrote off the following accounts as uncollectible (one entry): Cavey Co.,$8,490; Fogle Co., $2,520; Lake Furniture, $6,480; Melinda Shryer, $1,830.
Dec. 31.	Based on an analysis of the $1,000,500 of accounts receivable, it was estimated that $43,500 will be uncollectible. Journalized the adjusting entry.

Required:

1. Record the January 1 credit balance of $41,400 in a T account presented below in requirement 2b 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 $1,000,500 balance in accounts receivable reflects the adjustments made during the year.

Jan. 19-reinstate	Accounts Receivable-Arlene Gurley
	Allowance for Doubtful Accounts
Jan. 19-collection	Cash
	Accounts Receivable-Arlene Gurley
Apr. 3	Allowance for Doubtful Accounts
	Accounts Receivable-Premier GS Co.
July 16	Cash
	Allowance for Doubtful Accounts
	Accounts Receivable-Hayden Co.
Nov. 23-reinstate	Accounts Receivable-Harry Carr
	Allowance for Doubtful Accounts
Nov. 23-collection	Cash
	Accounts Receivable-Harry Carr
Dec. 31-write-off	Allowance for Doubtful Accounts
	Accounts Receivable-Cavey Co.
	Accounts Receivable-Fogle Co.
	Accounts Receivable-Lake Furniture
	Accounts Receivable-Melinda Shryer
Dec. 31-adjusting	Bad Debt Expense
	Allowance for Doubtful Accounts

Feedback

Set up T accounts. Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable. In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account. The amount of bad debt expense is affected by the balance in the allowance account.

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

Allowance for Doubtful Accounts
		Jan. 1 Balance
		Dec. 31 Adjusted Balance

Bad Debt Expense

Feedback

Set up T accounts. Recall that under the allowance method, the entry to write off an account debits Allowance for Doubtful Accounts and credits Accounts Receivable. In such cases where an account receivable that has been written off is later collected, the account is reinstated by an entry that reverses the write-off entry. Then record the receipt of cash as payment for the account. The amount of bad debt expense is affected by the balance in the allowance account.

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 sales of $6,180,000 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). $