Required 1. Use the preceding analysis to compute the estimated amount of uncollectible receivables. 2. Prepare the journal entry to record Nana Company estimated uncollectibles, assuming the balance in the Allowance for Doubtful Accounts prior to adjustment is:
Required 1. Use the preceding analysis to compute the estimated amount of uncollectible receivables. 2. Prepare the journal entry to record Nana Company estimated uncollectibles, assuming the balance in the Allowance for Doubtful Accounts prior to adjustment is:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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
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Required
1. Use the preceding analysis to compute the estimated amount of uncollectible
receivables.
2. Prepare the journal entry to record Nana Company estimated uncollectibles, assuming
the balance in the Allowance for Doubtful Accounts prior to adjustment is:
a. 0
b. $3,000 (Debit)
c. $2,800 (Credit)
da 8 (Estimating Bad Debts from Receivables Balances)
The following information is extracted from the accounting records of the Shelton
Corporation at the beginning of 2012:
Accounts Receivable
$63,000
Allowance for Doubtful Accounts
1,400 (Credit)
During 2012 sales on credit amounted to $575,000, $557,400 was collected on outstanding
receivables, and $2,600 of receivables were written off as uncollectible. On December 31, 2012,
Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.
Required
1. Prepare the journal entry to record Shelton's estimate of bad debt expense for 2012.
2. Prepare the Accounts Receivable section of Shelton's December 31, 2012 financial
position statement.
da 9 (Estimation vs. Direct Wrote-Off of Bad Debts)
The Blue Company makes credit sales of $21,000 during the month of February 2012. During
2012 collections are received on February sales of $20,400, accounts representing $600 of these
sales are written off as uncollectible, and a $100 account previously written off is collected.
Required
Prepare the journal entries necessary to record the preceding information if
1) Bad debts are estimated as 3% if sales at the time of sales, and
2) The bad debts are recorded as they actually occur.
da 10 (Comparison of Bad Debt Estimation Methods)
The following information (Prior to adjustment) is available from the accounting records of
the Boy Company on December 31, 2012:
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