Question
The following transactions were completed by The Irvine Company during the current fiscal year ended December 31: Feb. 8 Received 30% of the $18,900 balance
The following transactions were completed by The Irvine Company during the current fiscal year ended December 31:
Feb. 8 | Received 30% of the $18,900 balance owed by DeCoy Co., a bankrupt business, and wrote off the remainder as uncollectible. |
May 27 | Reinstated the account of Seth Nelsen, which had been written off in the preceding year as uncollectible. Journalized the receipt of $7,265 cash in full payment of Seths account. |
Aug. 13 | Wrote off the $6,410 balance owed by Kat Tracks Co., which has no assets. |
Oct. 31 | Reinstated the account of Crawford Co., which had been written off in the preceding year as uncollectible. Journalized the receipt of $3,980 cash in full payment of the account. |
Dec. 31 | Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,090; Bonneville Co., $5,485; Crow Distributors, $9,415; Fiber Optics, $1,190. |
Dec. 31 | Based on an analysis of the $1,774,000 of accounts receivable, it was estimated that $35,480 will be uncollectible. Journalized the adjusting entry. |
Required: | |||||||
1. | Record the January 1 credit balance of $25,795 in a T account for Allowance for Doubtful Accounts. | ||||||
2. |
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3. | Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry). | ||||||
4. | Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of of 1% of the net sales of $18,660,000 for the year, determine the following:
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CHART OF ACCOUNTSThe Irvine CompanyGeneral Ledger
ASSETS | |
110 | Cash |
111 | Petty Cash |
121 | Accounts Receivable-DeCoy Co. |
122 | Accounts Receivable-Seth Nelsen |
123 | Accounts Receivable-Kat Tracks Co. |
124 | Accounts Receivable-Crawford Co. |
125 | Accounts Receivable-Newbauer Co. |
126 | Accounts Receivable-Bonneville Co. |
127 | Accounts Receivable-Crow Distributors |
128 | Accounts Receivable-Fiber Optics |
129 | Allowance for Doubtful Accounts |
131 | Interest Receivable |
132 | Notes Receivable |
141 | Merchandise Inventory |
145 | Office Supplies |
146 | Store Supplies |
151 | Prepaid Insurance |
181 | Land |
191 | Store Equipment |
192 | Accumulated Depreciation-Store Equipment |
193 | Office Equipment |
194 | Accumulated Depreciation-Office Equipment |
LIABILITIES | |
210 | Accounts Payable |
211 | Salaries Payable |
213 | Sales Tax Payable |
214 | Interest Payable |
215 | Notes Payable |
EQUITY | |
310 | Irvine, Capital |
311 | Irvine, Drawing |
312 | Income Summary |
REVENUE | |
410 | Sales |
610 | Interest Revenue |
EXPENSES | |
510 | Cost of Merchandise Sold |
520 | Sales Salaries Expense |
521 | Advertising Expense |
522 | Depreciation Expense-Store Equipment |
523 | Delivery Expense |
524 | Repairs Expense |
529 | Selling Expenses |
530 | Office Salaries Expense |
531 | Rent Expense |
532 | Depreciation Expense-Office Equipment |
533 | Insurance Expense |
534 | Office Supplies Expense |
535 | Store Supplies Expense |
536 | Credit Card Expense |
537 | Cash Short and Over |
538 | Bad Debt Expense |
539 | Miscellaneous Expense |
710 | Interest Expense |
1. | Record the January 1 credit balance of $25,795 in a T account for Allowance for Doubtful Accounts. | ||
2. |
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Allowance for Doubtful Accounts | |||
Jan. 1 Balance | |||
Dec. 31 Adj. Balance |
Bad Debt Expense | |||
2. A. Journalize the transactions. For the December 31 adjusting entry, assume the $1,774,000 balance in accounts receivable reflects the adjustments made during the year. Refer to the chart of accounts for a listing of the account titles the company uses.
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3. Determine the expected net realizable value of the accounts receivable as of December 31 (after all of the adjustments and the adjusting entry).
$
4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of of 1% of the net sales of $18,660,000 for the year, determine the following:
A. Bad debt expense for the year. $
B. Balance in the allowance account after the adjustment of December 31. $
C. Expected net realizable value of the accounts receivable as of December 31. $
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