P8-43 Accounting for uncollectible accounts using the allowance method This problem continues the Canyon Canoe Company situation from Chapter 7. Canyon Canoe Company has experienced rapid growth in its first few months of operations and has had a significant increase in customers renting canoes and purchasing T-shirts. Many of these customers are asking for credit terms. Amber and Zack Wilson, stockholders and company managers, have decided it is time to review their business transactions and update some of their business practices. Their first step is to make decisions about handling accounts receivable. So far, year to date credit sales have been $15,500. A review of outstanding receivables resulted in the following aging schedule: USE THE Over 90 Days Total Balance $ 250 $ 500 Age of Accounts as of June 30, 2019 1-30 31-606 1-90 Customer Name Days Days Days Canyon Youth Club $ 250 Crazy Tees 200 $150 Early Start Daycare Lakefront Pavilion Outdoor Center $ 300 Rivers Canoe Club 350 Sport Shirts 450 120 Zack's Marina 75 75 75 Totals $1,900 $345 5375 570 225 $3,120 $500 Requirements 1. The company wants to use the allowance method to estimate bad debts. Determine the estimated bad debts expense under the following methods at June 30, 2019. Assume a zero beginning balance for Allowance for Bad Debts. Round to the nearest dollar. a. Percent-of-sales method, assuming 4.5% of credit sales will not be collected. b. Percent-of-receivables method, assuming 22.5% of receivables will not be collected. c. Aging-of-receivables method, assuming 5% of invoices 1-30 days will not be collected, 20% of invoices 31-60 days, 40% of invoices 61-90 days, and 75% of invoices over 90 days. 2. Journalize the entry at June 30, 2019, to adjust for bad debts expense using the percent- of-sales method. 3. Journalize the entry at June 30, 2019, to record the write-off of the Early Start Daycare invoice. 4. At June 30, 2019, open T-accounts for Accounts Receivable and Allowance for Bad Debts before Requirements 2 and 3. Post entries from Requirements 2 and 3 to those accounts. Assume a zero beginning balance for Allowance for Bad Debts. 5. Show how Canyon Canoe Company will report net accounts receivable on the balance sheet on June 30, 2019. P9-43 Calculating and journalizing partial-year depreciation This problem continues the Canyon Canoe Company situation from Chapter 8. Amber and Zack Wilson are continuing to review business practices. Currently, they are reviewing the company's property, plant, and equipment and have gathered the following information: Estimated Residual Value Depreciation Method* Monthly Depreciation Expense $ 100 S 0 SL 5,000 Acquisition Estimated Asset Date Cost Life Canoes Nov. 3, 2018 S 4 years 4,800 Land Dec. 1, 2018 85,000 Building Dec. 1, 2018 35,000 5 years Canoes Dec. 2, 2018 7,200 4 years Computer Mar. 2, 2019 3,600 3 years Office Furniture Mar. 3, 2019 3,000 5 years SL = Straight-line; DDB = Double-declining-balance SL 300 DDB 600 SL Requirements 1. Calculate the amount of monthly depreciation expense for the computer and office furniture for 2019. 2. For each asset, determine the book value as of December 31, 2018. Then, calculate the depreciation expense for the first six months of 2019 and the book value as of June 30, 2019