Question 3Dialex Watches completed the following selected transactions during 2007 & 2008:2007Dec. 31 Estimated that uncollectible-account (bad-debt) expense for the year was 1% of creditsales of $400,000 and recorded the amount as expense. Use the allowance method.Dec. 31 Made the closing entry for uncollectible-account expense.2008Jan. 17 Sold inventory to Mitch Vanez, $600, on account. Ignore cost of goods sold.June. 29 Wrote off Mitch Vanez’s account as uncollectible after repeated effort to collect fromhim.Aug. 6 Received $600 from Mitch Vanez, along with a letter apologizing for being so late.Reinstated Vanez’s account in full and recorded the cash receipt.Dec. 31 Made a compound entry to write off the following accounts as uncollectible: BernardKlaus, $1,700; Marie Monet, $1,300.Dec. 31 Estimated that uncollectible expense for the year was 1% of credit sales of $480,000,and recorded that amount as expenseDec. 31 Made the closing entry for uncollectible-account expense.Requirements:a) Open general ledger accounts for Allowance for Uncollectible Accounts and Uncollectible-AccountsExpense. Keep running balances. All accounts begin with zero balance.b) Record the transactions in the general journal and post to the two ledger accounts.c) The December 31, 2008 balance of Accounts Receivable is $139,000. Show how Accounts Receivablewould be reported on the balance sheet at that date.Mona School of Business & Management, University of the West Indies at Mona. - 5 -Question 4The June 30, 20X9, balance sheet of Ram Technologies reports the following:Accounts Receivable…………………………………. $265,000Allowance for Uncollectible Accounts (Cr)…………. 7,100At the end of each quarter, RAM estimates uncollectible-account expense to be 2% of credit sales. At theend of the year, RAM ages its accounts receivable. RAM then adjusts the balance in the Allowance forUncollectible Accounts to correspond to the aging schedule.During the second half of 20X9, RAM completed the following transactions:July 14 Made a compound entry to write off uncollectible accounts:T.J. Dooley, $700; Design Works, $2,400; and S. DeWitt, $100.Sept. 30 Recorded uncollectible-account expense equal to 2% of credit sales of $140,000Nov. 22 Wrote off accounts receivable as uncollectible:Transnet, $1,300; Webvan, $2,100; and Alpha Group, $700.Dec. 31 Recorded uncollectible-account expense based on the aging of receivables.Age of AccountsTotal1-30Days31 – 60Days61 – 90DaysOver 90Days$255,000 $120,000 $80,000 $40,000 $15,000Estimated percent (%) uncollectible 0.5% 1.0% 4% 50%Required:i) Record the transactions in the journal.ii) Open the Allowance for Uncollectible accounts, and post entries affecting that account. Keep arunning balance.iii) Show how RAM Technologies should report accounts receivable on its December 31, 20X9, balancesheet.
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.
Question 3
Dialex Watches completed the following selected transactions during 2007 & 2008:
2007
Dec. 31 Estimated that uncollectible-account (bad-debt) expense for the year was 1% of credit
sales of $400,000 and recorded the amount as expense. Use the allowance method.
Dec. 31 Made the closing entry for uncollectible-account expense.
2008
Jan. 17 Sold inventory to Mitch Vanez, $600, on account. Ignore cost of goods sold.
June. 29 Wrote off Mitch Vanez’s account as uncollectible after repeated effort to collect from
him.
Aug. 6 Received $600 from Mitch Vanez, along with a letter apologizing for being so late.
Reinstated Vanez’s account in full and recorded the cash receipt.
Dec. 31 Made a compound entry to write off the following accounts as uncollectible: Bernard
Klaus, $1,700; Marie Monet, $1,300.
Dec. 31 Estimated that uncollectible expense for the year was 1% of credit sales of $480,000,
and recorded that amount as expense
Dec. 31 Made the closing entry for uncollectible-account expense.
Requirements:
a) Open general ledger accounts for Allowance for Uncollectible Accounts and Uncollectible-Accounts
Expense. Keep running balances. All accounts begin with zero balance.
b) Record the transactions in the general journal and post to the two ledger accounts.
c) The December 31, 2008 balance of
would be reported on the
Mona School of Business & Management, University of the West Indies at Mona.
- 5 -
Question 4
The June 30, 20X9, balance sheet of Ram Technologies reports the following:
Accounts Receivable…………………………………. $265,000
Allowance for Uncollectible Accounts (Cr)…………. 7,100
At the end of each quarter, RAM estimates uncollectible-account expense to be 2% of credit sales. At the
end of the year, RAM ages its accounts receivable. RAM then adjusts the balance in the Allowance for
Uncollectible Accounts to correspond to the aging schedule.
During the second half of 20X9, RAM completed the following transactions:
July 14 Made a compound entry to write off uncollectible accounts:
T.J. Dooley, $700; Design Works, $2,400; and S. DeWitt, $100.
Sept. 30 Recorded uncollectible-account expense equal to 2% of credit sales of $140,000
Nov. 22 Wrote off accounts receivable as uncollectible:
Transnet, $1,300; Webvan, $2,100; and Alpha Group, $700.
Dec. 31 Recorded uncollectible-account expense based on the aging of receivables.
Age of Accounts
Total
1-30
Days
31 – 60
Days
61 – 90
Days
Over 90
Days
$255,000 $120,000 $80,000 $40,000 $15,000
Estimated percent (%) uncollectible 0.5% 1.0% 4% 50%
Required:
i) Record the transactions in the journal.
ii) Open the Allowance for Uncollectible accounts, and
running balance.
iii) Show how RAM Technologies should report accounts receivable on its December 31, 20X9, balance
sheet.
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