450 000 Bad Debts A company does not adjust its accounts receivable by estimating bad debts at the end of the fiscal period. It uses a method called direct write-off. With this method accounts receivable are written off when they are determined to be uncollectible For example, on January 31, 20-2, a debt of $1500 was determined to be uncol. lectible because the customer, P. Kully, had declared bankruptcy. The sale of $1500 had been made in the previous fiscal period. This entry was made on January 31, 20-2: Jan. 31 Bad Debts Expense 150000 Accounts Receivable/P. Kully To write off account of bankrupt customer. 150000 Questions 1. How does the fact that an adjustment for estimated bad debts was not made in 20-1 affect the financial statements for that year? 2. How does the write-off entry affect the financial statements of 20-2?

450 000 Bad Debts A company does not adjust its accounts receivable by estimating bad debts at the end of the fiscal period. It uses a method called direct write-off. With this method accounts receivable are written off when they are determined to be uncollectible For example, on January 31, 20-2, a debt of $1500 was determined to be uncol. lectible because the customer, P. Kully, had declared bankruptcy. The sale of $1500 had been made in the previous fiscal period. This entry was made on January 31, 20-2: Jan. 31 Bad Debts Expense 150000 Accounts Receivable/P. Kully To write off account of bankrupt customer. 150000 Questions 1. How does the fact that an adjustment for estimated bad debts was not made in 20-1 affect the financial statements for that year? 2. How does the write-off entry affect the financial statements of 20-2?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Recording Entries to Estimate Bad Debt Expense Including the Write-Off and Subsequent Collection of an Account Following are accounts of Long Company at its December 31 year-end for the current year. $25,500 Accounts receivable balance, December 31, prior year Allowance for doubtful accounts balance, December 31, prior year Total sales revenue during the current year (1/6 are on credit) Uncollectible account written off during the current year (A. Smith) Cash collected on accounts receivable during the current year 1,500 480,000 500 85,000 Required Recording Write-off b. Prepare the entry to record bad debt expense for each of the following three cases. • Note: Treat each case separately. 1. Bad debt losses assume 1% of credit sales. Date Dec. 31 Bad Debt Expense Allowance for Doubtful Accounts To record bad debt Recording Bad Debt Expense Account Name Date Dec. 31 Bad Debt Expense Age Less than 30 days 31-90 days Account Name Allowance for Doubtful Accounts To record bad debt 91-120…
es E6-11 (Algo) Determining Financial Statement Effects of Bad Debts Using the Percentage of Credit Sales Method LO6-2 During the current year, Sun Electronics, Incorporated, recorded credit sales of $740,000. Based on prior experience, it estimates a 2 percent bad debt rate on credit sales. a. On November 13 of the current year, an account receivable for $270 from a prior year was determined to be uncollectible and was written off. b. At year-end, the appropriate bad debt expense adjustment was recorded for the current year. Required: Indicate the effects of the transactions in the following table. Indicate the accounts affected and enter decreases to account categories with a minus sign. Transaction a. a. b. b. Assets Liabilities Stockholders' Equity
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An aging of a company's accounts receivable indicates an estimate of uncollectible accounts of $5,353. If Allowance for Doubtful Accounts has a $1,093 debit balance, the adjustment to journalize the bad debt expense for the period will require a a. debit to Bad Debt Expense for $6,446 b. debit to Bad Debt Expense for $5,353 c. credit to Allowance for Doubtful Accounts for $1,093 d. debit to Bad Debt Expense for $4,260
An aging of a company's accounts receivable indicates that $9700 is estimated to be uncollectible. If Allowance for Doubtful Accounts has a $3010 balance, the adjustment to record bad debts for the period will require a(n)
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