Need help with technical problem on Accounting
- Problem - Accounts Receivable Vaughn Co. makes most of its sales on a credit basis. Applying GAAP, Vaughn uses the allowance method to account for credit losses. The company adjusts its accounts just once a year, at the December 31 year-end. Consider the following balances pulled from Vaughn's unadjusted trial balance at year-end 2020: Credit Account Accounts receivable Allowance for doubtful accounts Debit 5,187,490 32,810 Vaughn prepared an aging of accounts at year-end 2020, as follows: Age Group 0-30 days 31-60 days 61-90 days 91-120 days Over 120 days Amount $2,153,680 1,392,510 874,130 461,290 305,880 S5,187,490 Estimated % Uncollectible 1.1% 4.6% 11.9% 18.4% 43.7% On March 19, 2021, Vaughn determined that it must write off a large receivable balance, amounting to $26,439. Notes Receivable On December 31, 2020, Vaughn received a 4-year, 3%, $27,935 promissory note as consideration in an inventory sale transaction on that date. The note requires the customer to pay interest annually on December 31 (2021 through 2024). The going market rate of interest for comparable notes on the issue date was 5%. Applying GAAP, Vaughn uses the effective interest method to amortize premiums and discounts on all of its promissory notes. Receivables - Data Analytics Below, you are provided information on the receivables and related allowance for credit losses for three members of the S&P 100. The information is provided for the years 2019, 2018 and 2017. All amounts are stated in millions of dollars. Capital One Financial Corporation 2017 Gross receivables, 12/31 254,473 Allowance for credit losses, 1/1 6,503 Write-offs 6,562 Bad debt expense 7,563 Other adjustments -2 Allowance for credit losses, 12/31 7,502 2018 238,679 7,502 6,112 5,858 -28 7.220 2019 265,809 7,220 6,252 6,223 17 7,208 2018 684, 196 12,355 7,113 7,354 -281 12,315 2019 699,483 12,315 7,768 8,218 18 12,783 Citigroup Inc. 2017 Gross receivables, 12/31 667,034 Allowance for credit losses, 1/1 12,060 Write-offs 7,076 Bad debt expense 7,503 Other adjustments -132 Allowance for credit losses, 12/31 12,355 Wells Fargo & Company 2017 Gross receivables, 12/31 956,770 Allowance for credit losses, 1/1 12,540 Write-offs 2,928 Bad debt expense 2,528 Other adjustments -180 Allowance for credit losses, 12/31 11,960 2018 953, 110 11,960 2,744 1.744 -253 10,707 2019 962,265 10,707 2,762 2,687 -176 10,456 - Instructions - Using the information provided above, address cach of the following matters related to receivables: (a) Accounts receivable: 3.0 (1) Give the adjusting entry Vaughn must make for bad debts at December 31, 2020. (2) Give the entry Vaughn must make to record the write-off of the customer balance on March 19, 2021. (b) Notes receivable: (1) (2) Give the entry Vaughn must make to record the receipt of the 4-year promissory note on December 31, 2020. Give the interest and collection entries Vaughn must make over the remaining term of the 4-year note through December 31, 2024). Tip - You might find it helpful to start by preparing an amortization schedule (see pages 7-19 and 7-20). (c) Receivables - data analytics: 1 Compute the 12/31 allowance as a percentage of the 12/31 receivables for each company and year. Prepare a clustered column chart to show the yearly percentage for each company. Which company shows a decreasing percentage for both 2018 and 2019? (2) Compute the 1/1 allowance as a percentage of the write-offs for each company and year. Prepare a clustered column chart to show the yearly percentage for each company. Which company shows a higher percentage for 2019 than for 2017? (3) Compute the cumulative expense for 2017 to 2019 as a percentage of the cumulative write-offs for 2017 to 2019. Prepare a clustered column chart to show the percentage for each company. Which company appears to have forecast write-offs the most accurately over this three-year period? Explain in one sentence. Please observe the following checklist of instructions as you complete this assignment: Prepare your journal entries and supporting calculations using Excel. Give careful attention to your formatting of information. Formatting includes effective presentation of information, correct spelling and capitalization, and proper use of dollar signs, commas, and underscoring. Refer to examples in the text for guidance. Round all dollar amounts you present in your journal entries to the nearest dollar. DO - Problem - Accounts Receivable Vaughn Co. makes most of its sales on a credit basis. Applying GAAP, Vaughn uses the allowance method to account for credit losses. The company adjusts its accounts just once a year, at the December 31 year-end. Consider the following balances pulled from Vaughn's unadjusted trial balance at year-end 2020: Credit Account Accounts receivable Allowance for doubtful accounts Debit 5,187,490 32,810 Vaughn prepared an aging of accounts at year-end 2020, as follows: Age Group 0-30 days 31-60 days 61-90 days 91-120 days Over 120 days Amount $2,153,680 1,392,510 874,130 461,290 305,880 S5,187,490 Estimated % Uncollectible 1.1% 4.6% 11.9% 18.4% 43.7% On March 19, 2021, Vaughn determined that it must write off a large receivable balance, amounting to $26,439. Notes Receivable On December 31, 2020, Vaughn received a 4-year, 3%, $27,935 promissory note as consideration in an inventory sale transaction on that date. The note requires the customer to pay interest annually on December 31 (2021 through 2024). The going market rate of interest for comparable notes on the issue date was 5%. Applying GAAP, Vaughn uses the effective interest method to amortize premiums and discounts on all of its promissory notes. Receivables - Data Analytics Below, you are provided information on the receivables and related allowance for credit losses for three members of the S&P 100. The information is provided for the years 2019, 2018 and 2017. All amounts are stated in millions of dollars. Capital One Financial Corporation 2017 Gross receivables, 12/31 254,473 Allowance for credit losses, 1/1 6,503 Write-offs 6,562 Bad debt expense 7,563 Other adjustments -2 Allowance for credit losses, 12/31 7,502 2018 238,679 7,502 6,112 5,858 -28 7.220 2019 265,809 7,220 6,252 6,223 17 7,208 2018 684, 196 12,355 7,113 7,354 -281 12,315 2019 699,483 12,315 7,768 8,218 18 12,783 Citigroup Inc. 2017 Gross receivables, 12/31 667,034 Allowance for credit losses, 1/1 12,060 Write-offs 7,076 Bad debt expense 7,503 Other adjustments -132 Allowance for credit losses, 12/31 12,355 Wells Fargo & Company 2017 Gross receivables, 12/31 956,770 Allowance for credit losses, 1/1 12,540 Write-offs 2,928 Bad debt expense 2,528 Other adjustments -180 Allowance for credit losses, 12/31 11,960 2018 953, 110 11,960 2,744 1.744 -253 10,707 2019 962,265 10,707 2,762 2,687 -176 10,456 - Instructions - Using the information provided above, address cach of the following matters related to receivables: (a) Accounts receivable: 3.0 (1) Give the adjusting entry Vaughn must make for bad debts at December 31, 2020. (2) Give the entry Vaughn must make to record the write-off of the customer balance on March 19, 2021. (b) Notes receivable: (1) (2) Give the entry Vaughn must make to record the receipt of the 4-year promissory note on December 31, 2020. Give the interest and collection entries Vaughn must make over the remaining term of the 4-year note through December 31, 2024). Tip - You might find it helpful to start by preparing an amortization schedule (see pages 7-19 and 7-20). (c) Receivables - data analytics: 1 Compute the 12/31 allowance as a percentage of the 12/31 receivables for each company and year. Prepare a clustered column chart to show the yearly percentage for each company. Which company shows a decreasing percentage for both 2018 and 2019? (2) Compute the 1/1 allowance as a percentage of the write-offs for each company and year. Prepare a clustered column chart to show the yearly percentage for each company. Which company shows a higher percentage for 2019 than for 2017? (3) Compute the cumulative expense for 2017 to 2019 as a percentage of the cumulative write-offs for 2017 to 2019. Prepare a clustered column chart to show the percentage for each company. Which company appears to have forecast write-offs the most accurately over this three-year period? Explain in one sentence. Please observe the following checklist of instructions as you complete this assignment: Prepare your journal entries and supporting calculations using Excel. Give careful attention to your formatting of information. Formatting includes effective presentation of information, correct spelling and capitalization, and proper use of dollar signs, commas, and underscoring. Refer to examples in the text for guidance. Round all dollar amounts you present in your journal entries to the nearest dollar. DO
