FINANCIAL ACCOUNTING 9TH
16th Edition
ISBN: 9781308821672
Author: Libby
Publisher: MCG/CREATE
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Chapter 6, Problem 6.21E
Recording, Reporting, and Evaluating a
Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $14,000; (2) up to 120 days past due, $4,500; and (3) more than 120 days past due. $2,500. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 2 percent, (2) 12 percent, and (3) 30 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $800 (credit) before the end-of-period
- a. During December, an Account Receivable (Patty’s Bake Shop) of $750 from a prior sale was determined to it uncollectible; therefore, it was written off immediately as a bad debt.
- b. On December 31, the appropriate adjusting entry for the year was recorded.
Required:
- 1. Give the required
journal entries for the two items listed above. - 2. Show how the amounts related to
Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations. - 3. On the basis of the data available, does the estimate resulting from the aging analysis appear to be reasonable? Explain.
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Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, $10,500; (2) up to 120 days past due, $3,500; and (3) more than 120 days past due, $3,000. Experience has shown that for each age group, the average loss rate on the amount of the receivables at year-end due to uncollectibility is (1) 3 percent, (2) 10 percent, and (3) 25 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts balance is $660 (credit) before the end-of-period adjusting entry is made.
Data during the current year follow:
a. During December, an Account Receivable (Patty's Bake Shop) of $610 from a prior sale was determined to be uncollectible; therefore, it was written off immediately as a bad debt.
b. On December 31, the appropriate adjusting entry for the year was recorded.
Required:
1. Give the required journal entries for the two…
Please help me to solve this question
Brown Cow Dairy uses the aging approach to estimate Bad Debt Expense. The balance of each account receivable is aged on the
basis of three time periods as follows: (1) 1 to 30 days old, $12,200; (2) 31 to 90 days old, $5,200; and (3) more than 90 days old,
$3,200. For each age group, the average loss rate on the amount of the receivable due to uncollectibility is estimated to be (1) 4
percent, (2) 12 percent, and (3) 15 percent, respectively. At December 31 (end of the current year), the Allowance for Doubtful Accounts
balance was $820 (credit) before the end-of-period adjusting entry is made.
Required:
1. Prepare a schedule to estimate an appropriate year-end balance for the Allowance for Doubtful Accounts.
2. What amount of Bad Debt Expense should be recorded on December 31?
3. If the unadjusted balance in the Allowance for Doubtful Accounts was a $620 debit balance, what amount of Bad Debt Expense
should be recorded on December 31?
Complete this question by entering your answers in…
Chapter 6 Solutions
FINANCIAL ACCOUNTING 9TH
Ch. 6 - Prob. 1QCh. 6 - What is gross profit or gross margin on sales? In...Ch. 6 - What is a credit card discount? How does it affect...Ch. 6 - Prob. 4QCh. 6 - Prob. 5QCh. 6 - Differentiate accounts receivable from notes...Ch. 6 - Which basic accounting principle is the allowance...Ch. 6 - Using the allowance method, is bad debt expense...Ch. 6 - Prob. 9QCh. 6 - Prob. 10Q
Ch. 6 - Prob. 11QCh. 6 - Prob. 12QCh. 6 - Prob. 13QCh. 6 - Prob. 14QCh. 6 - Briefly explain how the total amount of cash...Ch. 6 - Prob. 16QCh. 6 - Sales discounts with terms 2/10, n/30 mean: a. 10...Ch. 6 - Gross sales total 300,000, one-half of which were...Ch. 6 - A company has been successful in reducing the...Ch. 6 - When a company using the allowance method writes...Ch. 6 - You have determined that Company X estimates bad...Ch. 6 - Prob. 6MCQCh. 6 - Which of the following is not a step toward...Ch. 6 - When using the allowance method, as bad debt...Ch. 6 - Which of the following best describes the proper...Ch. 6 - Prob. 10MCQCh. 6 - Prob. 6.1MECh. 6 - Prob. 6.2MECh. 6 - Recording Bad Debts Prepare journal entries for...Ch. 6 - Prob. 6.4MECh. 6 - Determining the Effects of Credit Policy Changes...Ch. 6 - Prob. 6.6MECh. 6 - Prob. 6.7MECh. 6 - Prob. 6.1ECh. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Reporting Net Sales with Credit Sales, Sales...Ch. 6 - Determining the Effects of Credit Sales, Sales...Ch. 6 - Prob. 6.5ECh. 6 - Reporting Bad Debt Expense and Accounts Receivable...Ch. 6 - Recording Bad Debt Expense Estimates and...Ch. 6 - Recording Bad Debt Expense Estimates and...Ch. 6 - Prob. 6.9ECh. 6 - Prob. 6.10ECh. 6 - Computing Bad Debt Expense Using Aging Analysis...Ch. 6 - Recording and Reporting a Bad Debt Estimate Using...Ch. 6 - Recording and Reporting a Bad Debt Estimate Using...Ch. 6 - Prob. 6.14ECh. 6 - Prob. 6.15ECh. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Inferring Bad Debt Write-Offs and Cash Collections...Ch. 6 - Prob. 6.18ECh. 6 - Prob. 6.19ECh. 6 - Prob. 6.20ECh. 6 - Recording, Reporting, and Evaluating a Bad Debt...Ch. 6 - Prob. 6.22ECh. 6 - Prob. 6.23ECh. 6 - Interpreting tho Effects of Salos Declines and...Ch. 6 - Prob. 6.25ECh. 6 - Prob. 6.26ECh. 6 - Prob. 6.27ECh. 6 - Prob. 6.1PCh. 6 - Recording Bad Debts and Interpreting Disclosure of...Ch. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Preparing an Income Statement and Computing the...Ch. 6 - Prob. 6.5PCh. 6 - Prob. 6.6PCh. 6 - Prob. 6.7PCh. 6 - Reporting Net Sales and Expenses with Discounts,...Ch. 6 - Prob. 6.2APCh. 6 - Determining Bad Debt Expense Based on Aging...Ch. 6 - Prob. 6.4APCh. 6 - Prob. 6.5APCh. 6 - Prob. 6.1CONCh. 6 - Finding Financial Information Refer to the...Ch. 6 - Finding Financial Information Refer to the...Ch. 6 - Prob. 6.3CPCh. 6 - Prob. 6.4CPCh. 6 - Prob. 6.5CP
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