Chapter 8 -Receivables 31-60 days past due 61-90 days past due 91-180 days past due Over 180 days past due 2 190,000 60,000 36,000 24,000 $2,060,000 Estimate what the proper balance of the allowance for doubtful accounts should be as of December 31, 2019. Date Selby's Bike Co. has determined that the proper balance for the Allowance for Doubtful Accounts at December 31 is $76,475. Assume that the allowance for doubtful accounts for Selby's Bike Co. had a debit balance of $7,200 as of December 31, 2019. а GENERAL JOURNAL Description 5 15 40 80 Post ref Debit Page Credit 12
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
![1
2
31-60 days past due
61-90 days past due
91-180 days past due
Over 180 days past due
Estimate what the proper balance of the allowance for doubtful accounts should be as of
December 31, 2019.
Selby's Bike Co. has determined that the proper balance for the Allowance for Doubtful
Accounts at December 31 is $76,475. Assume that the allowance for doubtful accounts for
Selby's Bike Co. had a debit balance of $7,200 as of December 31, 2019.
1
2
Chapter 8-Receivables
Date
1
Step 1: The account must be reinstated.
Date
GENERAL JOURNAL
Description
Date
190,000
60,000
36,000
24,000
$2,060,000
Reinstated a written-off Account
1. Reinstate the receivable
2. Receive the cash against it. Reason: For control purposes, the person who receives and
records Cash Receipts is not the person with authority to Write-off Receivables. Likely a
manager is reinstating the receivable and the Cash Receipts clerk is recording the cash
receipt.
Fred sends us a check for $700
Step 2: The cash received is recorded.
GENERAL JOURNAL
Description
GENERAL JOURNAL
Description
Post
ref
Page 4
Post
ref
Debit
Post
ref
5
15
40
80
Debit
Debit
Page
Credit
Page
Credit
Page
Credit
1
2
1
2
1
2](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5e4e5146-969d-4643-8e1a-977cd9815aba%2Feaeea271-7f12-4b37-a96b-6db84875ce6c%2Fm4uqium_processed.jpeg&w=3840&q=75)
![The Allowance balance is a $200 credit before adjustment. Uncollectible accounts are estimated
to be $2,000.
The adjusting entry to record uncollectible accounts is:
GENERAL JOURNAL
1
2
1
2
Date
Chapter 8-Receivables
Now, the adjusting entry to record uncollectible accounts is:
GENERAL JOURNAL
Description
a.
Description
If the Allowance balance started with a $200 DEBIT balance and uncollectible accounts are
estimated to be $2,000.
Date
с.
Post
ref
Debit
Post
ref
Note: Bad Debt Expense estimate in the prior year was wrong, it was not an error. It was still a
good faith estimate and the apparent violation of the matching principle is allowed under GAAP.
Age Interval
Not Past Due
1-30 days past due
Debit
At the end of the current year, the accounts receivable account has a debit balance of $1,400,000
and sales for the year total $15,350,000. Determine the amount of the adjustment needed.
Page
Credit
The allowance account before adjustment has a debit balance of $23,000. Bad debt
expense is estimated at 4 of 1% of sales.
Balance
Page
Credit
$1,250,000
500,000
b.
The allowance account before adjustment has a debit balance of $23,000. An aging of the
accounts in the customer ledger indicates estimated doubtful accounts of $125,000.
The allowance account before adjustment has a credit balance of $14,500. Bad debt
expense is estimated at 2 of 1% of sales.
Page 3
d.
The allowance account before adjustment has a credit balance of $14,500. An aging of
the accounts in the customer ledger indicates estimated doubtful accounts of $180,000.
Selby's Bike Co. is a wholesaler motorcycle supplies. An aging of the company's accounts
receivable on December 31, 2019, and a historical analysis of the percentage of uncollectible
accounts in each age category are as follows:
% Uncollectible
1
2
1
2
0.75%
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