Part A. On 12/31/16, Phoebe Company’s balance sheet revealed a $7,000 balance in its allowance for doubtful accounts. During 2017, $2,000 of accounts were written off and $500 of accounts receivable previously written off were collected. On 12/31/17, bad debt expense was estimated to be 5% on net credit sales, which were $400,000 Required: Calculate the balance in the allowance for doubtful accounts on 12/31/17. Part B. The following information was taken from the unadjusted trial balance and aging schedule of Diane Company on December 31, 2017. All sales are on account. Accounts and related balances at December 31, 2017 before adjustment: Debit Credit Accounts receivable $46,000 Allowance for doubtful accounts $ 680 Sales (all on account) 500,000 Sales returns 3,000 Aging Schedule of Accounts Receivable: Age Amount % Uncollectible 0-30 days $14,000 5% 30-60 days 20,000 8% Over 60 days 12,000 12% Required: If Diane uses the aging schedule of accounts receivable to determine bad debts, what is the bad debt expense for the year ending December 31, 2017?
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.
Problem 4
Part A. On 12/31/16, Phoebe Company’s
Required: Calculate the balance in the allowance for doubtful accounts on 12/31/17.
Part B. The following information was taken from the unadjusted
Accounts and related balances at December 31, 2017 before adjustment:
|
|
Debit |
Credit |
|
Accounts receivable |
$46,000 |
|
|
Allowance for doubtful accounts |
|
$ 680 |
|
Sales (all on account) |
|
500,000 |
|
Sales returns |
3,000 |
|
Aging Schedule of Accounts Receivable:
|
Age |
Amount |
% Uncollectible |
|
0-30 days |
$14,000 |
5% |
|
30-60 days |
20,000 |
8% |
|
Over 60 days |
12,000 |
12% |
Required: If Diane uses the aging schedule of accounts receivable to determine
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