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 $2,120 cash in full payment of Arlenes account. Apr. 3. Wrote off the $12,150 balance owed by Premier GS Co., which is bankrupt. July 16. Received 40% of the $21,800 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 $3,455 cash in full payment. Dec. 31. Wrote off the following accounts as uncollectible (one entry): Cavey Co.,$9,135; Fogle Co., $2,715; Lake Furniture, $6,975; Melinda Shryer, $1,970. Dec. 31. Based on an analysis of the $1,074,100 of accounts receivable, it was estimated that $46,700 will be uncollectible. Journalized the adjusting entry. Required: 1. Record the January 1 credit balance of $44,500 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 $1,074,100 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. Bad Debt Expense Allowance for Doubtful Accounts Dec. 31-adjusting 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 Dec. 31 Adjusting Entry 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 $6,630,000 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). $ Feedback 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. Feedback Partially correct 1. 2. Check My Work1 more Check My Work uses remaining.