Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

P6-3 Determining Bad Debt Expense Based on Aging Analysis LO6-2 [The following information applies to the questions displayed below.] Blue Skies Equipment Company uses the

P6-3 Determining Bad Debt Expense Based on Aging Analysis LO6-2

[The following information applies to the questions displayed below.] Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 9 percent, (b) 17 percent, and (c) 32 percent, respectively.

At December 31, 2014 (end of the current accounting year), the Accounts Receivable balance was $53,800, and the Allowance for Doubtful Accounts balance was $980 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2014, follow:

B. BrownAccount Receivable
Date Explanation Debit Credit Balance
3/11/2013 Sale 14,300 14,300
6/30/2013 Collection 3,400 10,900
1/31/2014 Collection 3,800 7,100

D. DonaldsAccount Receivable
Date Explanation Debit Credit Balance
02/28/2014 Sale 21,700 21,700
04/15/2014 Collection 8,500 13,200
11/30/2014 Collection 4,400 8,800

N. NapierAccount Receivable
Date Explanation Debit Credit Balance
11/30/2014 Sale 9,600 9,600
12/15/2014 Collection 1,300 8,300

S. StrothersAccount Receivable
Date Explanation Debit Credit Balance
03/02/2012 Sale 5,600 5,600
04/15/2012 Collection 5,600 0
09/01/2013 Sale 10,600 10,600
10/15/2013 Collection 3,600 7,000
02/01/2014 Sale 22,400 29,400
03/01/2014 Collection 8,300 21,100
12/31/2014 Sale 3,300 24,400

T. ThomasAccount Receivable
Date Explanation Debit Credit Balance
12/30/2014 Sale 5,200 5,200

rev: 10_18_2016_QC_CS-66542

References

Section BreakP6-3 Determining Bad Debt Expense Based on Aging Analysis LO6-2

4.

value: 15.00 points

Required information

P6-3 Part 1

Required:

1. Compute the total accounts receivable in each age category.

References

eBook & Resources

WorksheetDifficulty: 2 Medium

P6-3 Part 1Learning Objective: 06-02 Estimate, report, and evaluate the effects of uncollectible accounts receivable (bad debts) on financial statements.

Check my work

5.

value: 15.00 points

Required information

P6-3 Part 2

2. Compute the estimated uncollectible amount for each age category and in total.

References

eBook & Resources

WorksheetDifficulty: 2 Medium

P6-3 Part 2Learning Objective: 06-02 Estimate, report, and evaluate the effects of uncollectible accounts receivable (bad debts) on financial statements.

Check my work

6.

value: 15.00 points

Required information

P6-3 Part 3

3. Prepare journal entry for bad debt expense at December 31, 2014. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

References

eBook & Resources

WorksheetDifficulty: 2 Medium

P6-3 Part 3Learning Objective: 06-02 Estimate, report, and evaluate the effects of uncollectible accounts receivable (bad debts) on financial statements.

Check my work

7.

value: 5.00 points

Required information

P6-3 Part 4

4. Show how the amounts related to accounts receivable should be presented on the 2014 income statement and balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

References

eBook & Resources

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

A Compilation Of University Level Assignments Marketing Audit Approach

Authors: Emeka Anyaduba

1st Edition

1475098057, 978-1475098051

More Books

Students also viewed these Accounting questions