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Flounder Corp. had record sales in 2020. It began 2020 with an Accounts Receivable balance of $485,000 and an Allowance for Doubtful Accounts of $40,000.
Flounder Corp. had record sales in 2020. It began 2020 with an Accounts Receivable balance of $485,000 and an Allowance for Doubtful Accounts of $40,000. Flounder recognized credit sales during the year of $6,670,000 and made monthly adjusting entries equal to 0.5% of each month's credit sales to recognize bad debt expense. Also during the year, the company wrote off $36,400 of accounts that were deemed to be uncollectible, although one customer whose $4,200 account had been written off surprised management by paying the amount in full in late September. Including this surprise receipt, $6,554,000 cash was collected on account in 2020. To assess the reasonableness of the allowance for doubtful accounts, the controller prepared the following aged listing of the receivables at December 31, 2020: Amount Probability of Collection 98% 92% Days Account Outstanding Less than 16 days Between 16 and 30 days Between 31 and 45 days Between 46 and 60 days Between 61 and 75 days Over 75 days 80% $279,500 124,000 83,000 39,000 18,700 24,600 $568,800 74% 50% 0% Reconcile the 2020 opening balance in Accounts Receivable to the $568,800 ending balance on the controller's aged listing. Accounts Receivable Reconciliation Opening balance $ 485000 Credit sales in year 6670000 Accounts written off (36400) Reinstatement of account collected 4200 Cash collected on account (6554000) Ending balance $ 568,800 Prepare the adjusting entry to bring the Allowance for Doubtful Accounts to its proper balance at year end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter "O" for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31 Bad Debt Expense Allowance for Doubtful Accounts e Textbook and Media List of Accounts Show how accounts receivable would be presented on the December 31, 2020 statement of financial position. Flounder Corp. Statement of financial position (Partial) $ (net) $ e Textbook and Media List of Accounts What is the dollar effect of the year-end bad debt adjustment on the before-tax income? The year-end bad debt adjustment would decrease before-tax income $
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