The following transactions were completed by The Irvine Company during the current fiscal year ended December 31:

Feb. 8	Received 45% of the $18,700 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 $7,270 cash in full payment of Seths account.
Aug. 13	Wrote off the $6,360 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 $3,975 cash in full payment of the account.
Dec. 31	Wrote off the following accounts as uncollectible (compound entry): Newbauer Co., $7,265; Bonneville Co., $5,595; Crow Distributors, $9,305; Fiber Optics, $1,150.
Dec. 31	Based on an analysis of the $1,759,500 of accounts receivable, it was estimated that $35,190 will be uncollectible. Journalized the adjusting entry.

Required:

1.

Record the January 1 credit balance of $25,685 in a T account for Allowance for Doubtful Accounts.

2.

A.	Journalize the transactions. For the December 31 adjusting entry, assume the $1,759,500 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.
B.	Post each entry that affects the following selected T accounts and determine the new balances: Allowance for Doubtful Accounts and Bad Debt Expense.

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 $17,710,000 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.

Please fill in the rest of the T Chart as well as the section of the journal under bad debt expense and allowance for doubtfull accounts.

QUESTION 2

The following selected transactions were taken from the records of Rustic Tables Company for the year ending December 31, 2016:

June	8.	Wrote off account of Kathy Quantel, $8,475.
Aug.	14.	Received $2,960 as partial payment on the $12,480 account of Rosalie Oakes. Wrote off the remaining balance as uncollectible.
Oct.	16.	Received the $8,475 from Kathy Quantel, whose account had been written off on June 8. Reinstated the account and recorded the cash receipt.
Dec.	31.	Wrote off the following accounts as uncollectible (record as one journal entry):
		Wade Dolan	$4,625
		Greg Gagne	3,595
		Amber Kisko	7,175
		Shannon Poole	3,025
		Niki Spence	6,650
	31.	If necessary, record the year-end adjusting entry for uncollectible accounts.

Rustic Tables Company prepared the following aging schedule for its accounts receivable:

Aging Class (Number of Days Past Due)	Receivables Balance on December 31	Estimated Percent of Uncollectible Accounts
030 days	$324,800	2%
3160 days	109,500	4
6190 days	23,800	11
91120 days	18,200	33
More than 120 days	43,200	80
Total receivables	$519,500

Required:

A.	Journalize the transactions for 2016 under the direct write-off method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
B.	Journalize the transactions for 2016 under the allowance method, assuming that the allowance account had a beginning balance of $35,800 on January 1, 2016, and the company uses the analysis of receivables method. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.
C.	How much higher (lower) would Rustic Tables 2016 net income have been under the direct write-off method than under the allowance method?

T Accounts Feb. 8 Aug. 13 Dec. 31 Dec. 31 Unadjusted Balance Dec. 31 Adjusting Entry Allowance for Doubtful Accounts 10.285 Jan. 1 Balance 6,360 May 27 23,315 oct. 31 Dec. 31 Adjusting Entry 3,029 Dec. 31 Adj. Balance Bad Debt Expense Shaded cells have f 25,685 7,270 3,975 V 35,190