From inception of operations to December 31, 2015, Harris Corporation provided for uncollectible accounts receivable under the allowance method. Provisions were made monthly at 2% of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Harris’s usual credit terms are net 30 days. The balance in the Allowance for Doubtful Accounts was $130,000 at January 1, 2016. During 2016, credit sales totaled $9,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Harris upgraded its computer facility in November 2016, and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows: Classification by Balance in Each Estimated % Month of Sale Category Uncollectible Nov.–Dec. 2016 $1,140,000 2% July–Oct. 600,000 10 Jan.–June 400,000 25 Prior to 1/1/2016 130,000 75 $2,270,000 Based on the review of collectibility of the account balances in the “prior to 1/1/2016” aging category, additional receivables totaling $60,000 were written off as of December 31, 2016. Effective with the year ended December 31, 2016, Harris adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. Required: 1. Prepare a schedule analyzing the changes in the allowance for doubtful accounts for the year ended December 31, 2016. Show supporting computations in good form. 2. Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts balance as of December 31, 2016.

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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From inception of operations to December 31, 2015, Harris Corporation provided for uncollectible accounts receivable under the allowance method. Provisions were made monthly at 2% of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Harris’s usual credit terms are net 30 days.

The balance in the Allowance for Doubtful Accounts was $130,000 at January 1, 2016. During 2016, credit sales totaled $9,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Harris upgraded its computer facility in November 2016, and an aging of accounts receivable was prepared for the first time as of December 31, 2016. A summary of the aging is as follows:

Classification by	Balance in Each	Estimated %
Month of Sale	Category	Uncollectible
Nov.–Dec. 2016	$1,140,000	2%
July–Oct.	600,000	10
Jan.–June	400,000	25
Prior to 1/1/2016	130,000	75
	$2,270,000

Based on the review of collectibility of the account balances in the “prior to 1/1/2016” aging category, additional receivables totaling $60,000 were written off as of December 31, 2016. Effective with the year ended December 31, 2016, Harris adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.

	Required:
1.	Prepare a schedule analyzing the changes in the allowance for doubtful accounts for the year ended December 31, 2016. Show supporting computations in good form.
2.	Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts balance as of December 31, 2016.

Required:

Prepare a schedule analyzing the changes in the allowance for doubtful accounts for the year ended December 31, 2016. Show supporting computations in good form.

Prepare the journal entry for the year-end adjustment to the Allowance for Doubtful Accounts balance as of December 31, 2016.

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