Homework Help is Here – Start Your Trial Now!
Business
Accounting
Credit Losses Based on Accounts Receivable Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: Probability of Age Group 0-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due Over 180 days past due Balance Noncollection $90,000 20,000 11.000 196 296 5% 6,000 10% 6,000 25% $133.000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. a. Prepare the adjusting entry for estimated credit losses on December 31. b. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $650.

Credit Losses Based on Accounts Receivable Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: Probability of Age Group 0-30 days past due 31-60 days past due 61-120 days past due 121-180 days past due Over 180 days past due Balance Noncollection $90,000 20,000 11.000 196 296 5% 6,000 10% 6,000 25% $133.000 The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. a. Prepare the adjusting entry for estimated credit losses on December 31. b. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $650.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
icon
Concept explainers
Question
Hunter, inc., analyzed it’s accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible. The company handles credit losses using the allowance method. The credit balance of the allowance for doubtful accounts is $820 on December 31, before any adjustments. A. Prepare the adjusting entry for estimated credit losses on December 31. B. Prepare the journal entry to write off the Rose company’s account on April 10 of the following year in the amount of $650.
## Credit Losses Handling Using Allowance Method The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. ### Adjusting Entry for Estimated Credit Losses (December 31) #### Task a. Prepare the adjusting entry for estimated credit losses on December 31. <div> <table border="1"> <tr> <th>Date</th> <th>Description</th> <th>Debit</th> <th>Credit</th> </tr> <tr> <td>Dec. 31</td> <td></td> <td>0</td> <td>0</td> </tr> <tr> <td></td> <td></td> <td>0</td> <td>0</td> </tr> </table> </div> <p>To record allowance for credit losses.</p> ### Write-off Entry for Rose Company's Account (April 10) #### Task b. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $650. <div> <table border="1"> <tr> <th>Date</th> <th>Description</th> <th>Debit</th> <th>Credit</th> </tr> <tr> <td>April 10</td> <td></td> <td>0</td> <td>0</td> </tr> <tr> <td></td> <td></td> <td>0</td> <td>0</td> </tr> </table> </div> <p>To write off Rose Company's account.</p>
Transcribed Image Text:## Credit Losses Handling Using Allowance Method The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. ### Adjusting Entry for Estimated Credit Losses (December 31) #### Task a. Prepare the adjusting entry for estimated credit losses on December 31. <div> <table border="1"> <tr> <th>Date</th> <th>Description</th> <th>Debit</th> <th>Credit</th> </tr> <tr> <td>Dec. 31</td> <td></td> <td>0</td> <td>0</td> </tr> <tr> <td></td> <td></td> <td>0</td> <td>0</td> </tr> </table> </div> <p>To record allowance for credit losses.</p> ### Write-off Entry for Rose Company's Account (April 10) #### Task b. Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $650. <div> <table border="1"> <tr> <th>Date</th> <th>Description</th> <th>Debit</th> <th>Credit</th> </tr> <tr> <td>April 10</td> <td></td> <td>0</td> <td>0</td> </tr> <tr> <td></td> <td></td> <td>0</td> <td>0</td> </tr> </table> </div> <p>To write off Rose Company's account.</p>
**Credit Losses Based on Accounts Receivable** Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: | Age Group | Balance | Probability of Noncollection | |---|---|---| | 0–30 days past due | $90,000 | 1% | | 31–60 days past due | 20,000 | 2% | | 61–120 days past due | 10,000 | 5% | | 121–180 days past due | 6,000 | 10% | | Over 180 days past due | 6,000 | 25% | | **Total** | **$132,000** | | The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. **Steps to be followed:** a. **Prepare the adjusting entry for estimated credit losses on December 31.** b. **Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $650.** **Details for the Adjusting Entry:** 1. Identify the expected uncollectible amount for each age group by multiplying their balances by their respective probabilities of noncollection. 2. Sum those uncollectible amounts to find the total expected credit losses. 3. Adjust the Allowance for Doubtful Accounts to reflect this total, considering the existing credit balance. For example: - 0–30 days past due: $90,000 x 1% = $900 - 31–60 days past due: $20,000 x 2% = $400 - 61–120 days past due: $10,000 x 5% = $500 - 121–180 days past due: $6,000 x 10% = $600 - Over 180 days past due: $6,000 x 25% = $1,500 Total expected credit losses: $3,900. Since there is already a credit balance of $820: Adjustment needed = Total expected credit losses - Existing credit balance = $3,900 - $820 = $3,080 **Journal Entry for Adjusting Entry:** | Date | Description |
Transcribed Image Text:**Credit Losses Based on Accounts Receivable** Hunter, Inc., analyzed its accounts receivable balances at December 31, and arrived at the aged balances listed below, along with the percentage that is estimated to be uncollectible: | Age Group | Balance | Probability of Noncollection | |---|---|---| | 0–30 days past due | $90,000 | 1% | | 31–60 days past due | 20,000 | 2% | | 61–120 days past due | 10,000 | 5% | | 121–180 days past due | 6,000 | 10% | | Over 180 days past due | 6,000 | 25% | | **Total** | **$132,000** | | The company handles credit losses using the allowance method. The credit balance of the Allowance for Doubtful Accounts is $820 on December 31, before any adjustments. **Steps to be followed:** a. **Prepare the adjusting entry for estimated credit losses on December 31.** b. **Prepare the journal entry to write off the Rose Company's account on April 10 of the following year in the amount of $650.** **Details for the Adjusting Entry:** 1. Identify the expected uncollectible amount for each age group by multiplying their balances by their respective probabilities of noncollection. 2. Sum those uncollectible amounts to find the total expected credit losses. 3. Adjust the Allowance for Doubtful Accounts to reflect this total, considering the existing credit balance. For example: - 0–30 days past due: $90,000 x 1% = $900 - 31–60 days past due: $20,000 x 2% = $400 - 61–120 days past due: $10,000 x 5% = $500 - 121–180 days past due: $6,000 x 10% = $600 - Over 180 days past due: $6,000 x 25% = $1,500 Total expected credit losses: $3,900. Since there is already a credit balance of $820: Adjustment needed = Total expected credit losses - Existing credit balance = $3,900 - $820 = $3,080 **Journal Entry for Adjusting Entry:** | Date | Description |
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps with 3 images

SEE SOLUTIONCheck out a sample Q&A here
Blurred answer
Knowledge Booster
Receivables Management
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Similar questions
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS