College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
22nd Edition
ISBN: 9781305666160
Author: James A. Heintz, Robert W. Parry
Publisher: Cengage Learning
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Chapter 16, Problem 1CP
Martel Co. has $320,000 in
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By the end of its first year of operations, Previts Corporation has credit sales of $750,000 and accounts receivable of $350,000. Given it’s the first year of operations, Previts’ management is unsure how much allowance for uncollectible accounts it should establish. One of the company’s competitors, which has been in the same industry for an extended period, estimates uncollectible accounts to be 2% of ending accounts receivable, so Previts decides to use that same amount. However, actual write-offs in the following year were 25% of the $350,000 (= $87,500). Previts’ inexperience in the industry led to making sales to high credit risk customers.Required:1. Record the adjustment for uncollectible accounts at the end of the first year of operations using the 2% estimate of accounts receivable.2. By the end of the second year, Previts has the benefit of hindsight to know that estimates of uncollectible accounts in the first year were too low. By how much did Previts underestimate…
By the end of its first year of operations, Previts Corporation has credit sales of $690,000 and accounts receivable of $290,000. Given it’s the first year of operations, Previts’ management is unsure how much allowance for uncollectible accounts it should establish. One of the company’s competitors, which has been in the same industry for an extended period, estimates uncollectible accounts to be 2% of ending accounts receivable, so Previts decides to use that same amount. However, actual write-offs in the following year were 25% of the $290,000 (= $72,500). Previts’ inexperience in the industry led to making sales to high credit risk customers.
2. By the end of the second year, Previts has the benefit of hindsight to know that estimates of uncollectible accounts in the first year were too low. By how much did Previts underestimate uncollectible accounts in the first year? How did this underestimation affect the reported amounts of total assets and expenses at the end of the…
By the end of its first year of operations, Previts Corporation has credit sales of $690,000 and accounts receivable of $290,000. Given it’s the first year of operations, Previts’ management is unsure how much allowance for uncollectible accounts it should establish. One of the company’s competitors, which has been in the same industry for an extended period, estimates uncollectible accounts to be 2% of ending accounts receivable, so Previts decides to use that same amount. However, actual write-offs in the following year were 25% of the $290,000 (= $72,500). Previts’ inexperience in the industry led to making sales to high credit risk customers.
Required:
1. Record the adjustment for uncollectible accounts at the end of the first year of operations using the 2% estimate of accounts receivable. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)
Journal entry worksheet
Record the adjusting…
Chapter 16 Solutions
College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)
Ch. 16 - There are two methods of accounting for...Ch. 16 - The matching principle states that debits should...Ch. 16 - Using the percentage of sales method, the balance...Ch. 16 - When an account is written off under the allowance...Ch. 16 - Each time an account is written off under the...Ch. 16 - The dollar difference between Accounts Receivable...Ch. 16 - A business has an ending balance in Accounts...Ch. 16 - A business has an ending balance in Accounts...Ch. 16 - Prob. 4MCCh. 16 - Under the allowance method, when an account is...
Ch. 16 - Prob. 1CECh. 16 - Tonis Tech Shop has total credit sales for the...Ch. 16 - Fionas Pharmacy uses the direct write-off method...Ch. 16 - Prob. 1RQCh. 16 - Prob. 2RQCh. 16 - Prob. 3RQCh. 16 - Prob. 4RQCh. 16 - Prob. 5RQCh. 16 - Prob. 6RQCh. 16 - Prob. 7RQCh. 16 - Under the allowance method, what journal entries...Ch. 16 - Prob. 9RQCh. 16 - Prob. 10RQCh. 16 - CALCULATION OF NET REALIZABLE VALUE L. R. Updike...Ch. 16 - UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES Rossins...Ch. 16 - UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF RECEIVABLES...Ch. 16 - COLLECTION OF ACCOUNTS WRITTEN OFFALLOWANCE METHOD...Ch. 16 - UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES AND...Ch. 16 - DIRECT WRITE-OFF METHOD Maria Rivera, owner of...Ch. 16 - COLLECTION OF ACCOUNT WRITTEN OFFDIRECT WRITE-OFF...Ch. 16 - UNCOLLECTIBLE ACCOUNTSALLOWANCE METHOD Pyle...Ch. 16 - UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES AND...Ch. 16 - AGING ACCOUNTS RECEIVABLE An analysis of the...Ch. 16 - DIRECT WRITE-OFF METHOD Williams Hendricks...Ch. 16 - CALCULATION OF NET REALIZABLE VALUE Mary Martin...Ch. 16 - UNCOLLECTIBLE ACCOUNTS-PERCENTAGE OF SALES Nicoles...Ch. 16 - UNCOLLECTIBLE ACCOUNTS-PERCENTAGE OF RECEIVABLES...Ch. 16 - COLLECTION OF ACCOUNT WRITTEN OFFALLOWANCE METHOD...Ch. 16 - UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES AND...Ch. 16 - DIRECT WRITE-OFF METHOD Brent Mussellman, owner of...Ch. 16 - COLLECTION OF ACCOUNT WRITTEN OFFDIRECT WRITE-OFF...Ch. 16 - UNCOLLECTIBLE ACCOUNTSALLOWANCE METHOD Lewis...Ch. 16 - UNCOLLECTIBLE ACCOUNTSPERCENTAGE OF SALES AND...Ch. 16 - AGING ACCOUNTS RECEIVABLE An analysis of the...Ch. 16 - DIRECT WRITE-OFF METHOD Lee and Chen Distributors...Ch. 16 - Sam and Robert are identical twins. They opened...Ch. 16 - Martel Co. has 320,000 in Accounts Receivable on...Ch. 16 - Prob. 2CPCh. 16 - At the end of 20-3, Martel Co. had 410,000 in...
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- At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in Allowance for Doubtful Accounts. Martel has now been in business for three years and wants to base its estimate of uncollectible accounts on its own experience. Assume that Martel Co.s adjusting entry for uncollectible accounts on December 31, 20-2, was a debit to Bad Debt Expense and a credit to Allowance for Doubtful Accounts of 25,000. (a) Estimate Martels uncollectible accounts percentage based on its actual bad debt experience during the past two years. (b) Prepare the adjusting entry on December 31, 20-3, for Martel Co.s uncollectible accounts.arrow_forwardTonis Tech Shop has total credit sales for the year of 170,000 and estimates that 3% of its credit sales will be uncollectible. Allowance for Doubtful Accounts has a credit balance of 275. Prepare the adjusting entry at year-end for the estimated bad debt expense. (a) Based on an aging of its accounts receivable, Kyles Cyclery estimates that 3,200 of its year-end accounts receivable will be uncollectible. Allowance for Doubtful Accounts has a debit balance of 280 at year-end. Prepare the adjusting entry at year-end for the estimated uncollectible accounts.arrow_forwardBy the end of its first year of operations, Previts Corporation has credit sales of $690,000 and accounts receivable of $290,000. Given it’s the first year of operations, Previts’ management is unsure how much allowance for uncollectible accounts it should establish. One of the company’s competitors, which has been in the same industry for an extended period, estimates uncollectible accounts to be 2% of ending accounts receivable, so Previts decides to use that same amount. However, actual write-offs in the following year were 25% of the $290,000 (= $72,500). Previts’ inexperience in the industry led to making sales to high credit risk customers. 3. Should Previts prepare new financial statements for the first year of operations to show the correct amount of uncollectible accounts? Yes Noarrow_forward
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