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 $$1,695$ cash in full pay 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 $$1,695$ cash in full payment of Arlene$$s account.

Apr. $3$ Wrote off the $$9,710$ balance owed by Premier GS Co$.,$ which is bankrupt.

July $16$ Received $25\%$ of the $$17,400$ 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 $$2,765$ cash in full payment.

Dec. $31$ Wrote off the following accounts as uncollectible $($one entry$)$: Cavey Co$.,$ $$7,305$; Fogle Co$.,$ $$2,170$; Lake Furniture, $$5,575$; Melinda Shryer, $$1,575.$

$31$ Based on an analysis of the $$860,200$ of accounts receivable, it was estimated that $$37,400$ will be uncollectible. Journalized the adjusting entry.

Required:

$1.$ Record the January $1$ credit balance of $$35,600$ in a T account presented below in requirement $2$b for Allowance for Doubtful Accounts.

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$2.$ a$.$ Journalize the transactions. If an amount box does not require an entry, leave it blank. Note: For the December $31$ adjusting entry, assume the $$860,200$ balance in accounts receivable reflects the adjustments made during the year.

Jan. $19-$reinstate

Jan. $19-$collection

Apr. $3$

July $16$

Nov. $23-$reinstate

Nov. $23-$collection

Dec. $31-$write$-$off

Dec. $31-$adjusting

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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.

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

Allowance for Doubtful Accounts

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_2$

Jan. $1$ Balance fill in the blank $5779$b$0$f$5$f$07$dfd$4\_3$

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_5$

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_7$

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_9$

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_11$

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_13$

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_15$

Dec. $31$ Adjusted Balance fill in the blank $5779$b$0$f$5$f$07$dfd$4\_16$

Bad Debt Expense

fill in the blank $5779$b$0$f$5$f$07$dfd$4\_18$

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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.

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$3.$ Determine the expected net realizable value of the accounts receivable as of December $31($after all of the adjustments and the adjusting entry$).$

$fill in the blank dcd$1$a$1$fa$7$fe$6$fba$\_1$

$4.$ 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 $(1)/(2)$ of $1\%$ of the sales of $$5,310,000$ for the year, determine the following:

a$.$ Bad debt expense for the year.

$fill in the blank dcd$1$a$1$fa$7$fe$6$fba$\_2$

b$.$ Balance in the allowance account after the adjustment of December $31.$

$fill in the blank dcd$1$a$1$fa$7$fe$6$fba$\_3$

c$.$ Expected net realizable value of the accounts receivable as of December $31($after all of the adjustments and the adjusting entry$).$

$fill in the blank dcd$1$a$1$fa$7$fe$6$fba$\_4$

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Remember that net realizable value is the amount that is expected to be collected or realized.

The analysis of receivables method places more emphasis on the net realizable value of the receivables and, thus, emphasizes the balance sheet. That is$,$ the amount of the adjusting entry is the amount that will yield an adjusted balance for Allowance for Doubtful Accounts equal to that estimated by the aging schedule.

The analysis of receivables method is based on the assumption that the longer an account receivable is outstanding the less likely that it will be collected.

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