L01 PROBLEM 7.4A Wilcox Mills is a manufacturer that makes all sales on 30-day credit terms. Annual sales are\ Accounting for\ 105\ Uncollectible approximately

$30

million. At the end of 2010 , accounts receivable were presented in the company's balance sheet as follows:\ Accounts\ Accounts receivable from clients . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,100,000

\ Less: Allowance for doubtful accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,000\ During 2011,

$165,000

of specific accounts receivable were written off as uncollectible. Of these accounts written off, receivables totaling

$15,000

were subsequently collected. At the end of 2011 , an aging of accounts receivable indicated a need for a

$90,000

allowance to cover possible failure to collect the accounts currently outstanding.\ Wilcox Mills makes adjusting entries for uncollectible accounts only at year-end.\ Problem Set A\ 327\ Instructions\ a. Prepare the following general journal entries:\ One entry to summarize all accounts written off against the Allowance for Doubtful Accounts during 2011.\ Entries to record the

$15,000

in accounts receivable that were subsequently collected.\ The adjusting entry required at December 31,2011 , to increase the Allowance for Doubtful Accounts to

$90,000

.\ b. Notice that the Allowance for Doubtful Accounts was only

$80,000

at the end of 2010 , but uncollectible accounts during 2011 totaled

$150,000

(

$165,000

less the

$15,000

reinstated). Do these relationships appear reasonable, or was the Allowance for Doubtful Accounts greatly understated at the end of 2010 ? Explain.

PROBLEM 7.4A Accounting for Uncollectible Accounts Wilcox Mills is a manufacturer that makes all sales on 30-day credit terms. Annual sales are approximately $30 million. At the end of 2010 , accounts receivable were presented in the company's balance sheet as follows: During 2011, $165,000 of specific accounts receivable were written off as uncollectible. Of these accounts written off, receivables totaling $15,000 were subsequently collected. At the end of 2011 , an aging of accounts receivable indicated a need for a $90,000 allowance to cover possible failure to collect the accounts currently outstanding. Wilcox Mills makes adjusting entries for uncollectible accounts only at year-end. Problem Set A 327 Instructions a. Prepare the following general journal entries: 1. One entry to summarize all accounts written off against the Allowance for Doubtful Accounts during 2011. 2. Entries to record the $15,000 in accounts receivable that were subsequently collected. 3. The adjusting entry required at December 31,2011 , to increase the Allowance for Doubtful Accounts to $90,000. b. Notice that the Allowance for Doubtful Accounts was only $80,000 at the end of 2010 , but uncollectible accounts during 2011 totaled $150,000 ( $165,000 less the $15,000 reinstated). Do these relationships appear reasonable, or was the Allowance for Doubtful Accounts greatly understated at the end of 2010? Explain