P 7-4 Uncollectible accounts LO7-5, LOT-6 Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company's fiscal year-end. The 2020 balance sheet disclosed the following: Current assets: Receivables, net of allowance for uncollectible accounts of $30,000 $432,000 During 2021, credit sales were $1,750,000. cash collections from customers $1,830,000, and $35,000 in accounts receivable were written off. addition, $3,000 was collected from a customer whose account was written off in 2020. An aging of accounts receivable at December 31, 2021, reveals the following: Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0-60 days 65% 4% 61-90 days 20 15 91-120 days 10 25 Over 120 days 5 40 Required: 1. Prepare summary journal entries to account for the 2021 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: a. Bad debt expense estimated to be 3% of credit sales for the year. 6. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. c. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable. 3. For situations (a)-c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet? RAINTREE COSMETIC COMPANY General Journal Credit Account Debit Requirement 1: To record accounts receivable written off during the year 2021: Allowance for uncollectible accounts Accounts receivable To record collection of account receivable previously written off. Accounts receivable Allowance for uncollectible accounts Cash Accounts receivable Debit Credit Requirement 2(a): Account Bad debt expense Allowance for uncollectible accounts Requirement 2(b): Accounts receivable analysis: Beginning balance Add: Credit sales Less: Write-offs Less: Cash collections Ending balance Required allowance for uncollectible accounts Allowance for uncollectible accounts analysis: Beginning balance Add: Collection of receivable previously written off Less: Write-offs Balance before adjustments Required allowance (determined above) Bad debt expense adjustment Debit Credit Account Bad debt expense Allowance for uncollectible accounts Requirement 2(c): RAINTREE COSMETIC COMPANY Required Allowance Amount Age Group 0-60 days 61-90 days 91-120 days Over 120 days Totals % of Year-end Receivables 65% 20% 10% 5% Percent Estimated Uncollectible Allowance 4% 15% 25% 40% Allowance for uncollectible accounts analysis: Beginning balance Add: Collection of receivable previously written off Less: Write-offs Balance before adjustments Required allowance Bad debt expense adjustment Debit Credit Account Bad debt expense Allowance for uncollectible accounts Requirement 3: RAINTREE COSMETIC COMPANY Net Amount of Accounts Receivable Accounts Receivable Year-end Allowance Net Amount (b) (c)