Financial and Managerial Accounting
7th Edition
ISBN: 9781259726705
Author: John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher: McGraw-Hill Education
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Chapter 7, Problem 8E
Exercise 7-8 Percent of receivables method P3
Refer to the information in Exercise 7-7 to complete the following requirements.
- Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4.5% of total
accounts receivable to estimate uncollectibles, instead of the aging of receivables method. - Prepare the
adjusting entry to recordbad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $12,000 credit. - Prepare the adjusting entry to record bad debts expenses using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $1,000 debit.
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Daley Company prepared the following aging of receivables analysis at December 31.
Days Past Due
Total
$570,000
1 to 30
$90,000
Over 90
$30,000
10%
31 to 60
61 to 90
Accounts receivable
$396,000
$36,000
$18,000
7%
1%
2 %
5%
Percent uncollectible
a. Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 4.5% of total accounts receivable to
estimate uncollectibles, instead of the aging of receivables method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the
Allowance for Doubtful Accounts is a $12,000 credit.
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the
Allowance for Doubtful Accounts is a $1,000 debit.
Complete this question by entering your answers in the tabs below.
QUESTION 10
Match the term on the left to the appropriate classification or description on the right.
v Allowance for doubtful accounts
A. Discounts for early payment of A/R, recorded as contra-
revenues
v Net accounts receivable
B. An account that the firm credits when it records bad debt
v Sales discounts
expense
v Write-offs of A/R
C. Entries that reduce gross accounts receivable
D. Gross accounts receivable minus Allowance for doubtful
accounts
31
Chapter 7 Solutions
Financial and Managerial Accounting
Ch. 7 - Prob. 1MCQCh. 7 - Prob. 2MCQCh. 7 - Prob. 3MCQCh. 7 - Prob. 4MCQCh. 7 - Prob. 5MCQCh. 7 - Prob. 1DQCh. 7 - Prob. 2DQCh. 7 - Prob. 3DQCh. 7 - Prob. 4DQCh. 7 - Prob. 5DQ
Ch. 7 - Prob. 6DQCh. 7 - Prob. 7DQCh. 7 - Prob. 8DQCh. 7 - Prob. 9DQCh. 7 - Prob. 10DQCh. 7 - Prob. 1QSCh. 7 - Prob. 2QSCh. 7 - Prob. 3QSCh. 7 - QS 7-4 Distinguishing between allowance method and...Ch. 7 - QS 7-5 Allowance method for bad debts P2
Gomez...Ch. 7 - Percent of accounts receivable method P3 Warner...Ch. 7 - Prob. 7QSCh. 7 - Prob. 8QSCh. 7 - Prob. 9QSCh. 7 - Prob. 10QSCh. 7 - Prob. 11QSCh. 7 - Prob. 12QSCh. 7 - Prob. 13QSCh. 7 - Prob. 1ECh. 7 - Prob. 2ECh. 7 - Prob. 3ECh. 7 - Prob. 4ECh. 7 - Prob. 5ECh. 7 - Prob. 6ECh. 7 - Prob. 7ECh. 7 - Exercise 7-8 Percent of receivables method P3...Ch. 7 - Prob. 9ECh. 7 - Prob. 10ECh. 7 - Prob. 11ECh. 7 - Prob. 12ECh. 7 - Prob. 13ECh. 7 - Exercise 7-14 Dishonoring a note P4 Prepare...Ch. 7 - Prob. 15ECh. 7 - Prob. 16ECh. 7 - Prob. 17ECh. 7 - Prob. 1PSACh. 7 - Prob. 2PSACh. 7 - Prob. 3PSACh. 7 - Prob. 4PSACh. 7 - Prob. 5PSACh. 7 - Prob. 1PSBCh. 7 - Prob. 2PSBCh. 7 - Prob. 3PSBCh. 7 - Prob. 4PSBCh. 7 - Prob. 5PSBCh. 7 - Prob. 7SPCh. 7 - Prob. 1GLPCh. 7 - Prob. 1BTNCh. 7 - Prob. 2BTNCh. 7 - Anton Blair is the manager of a medium-size...Ch. 7 - Prob. 4BTNCh. 7 - Prob. 5BTNCh. 7 - Prob. 6BTNCh. 7 - Prob. 7BTNCh. 7 - Prob. 8BTNCh. 7 - Prob. 9BTN
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- Adjustment for uncollectible accounts Using data in Exercise 9-9, assume that the allowance for doubtful accounts for Waddell Industries has a credit balance of 6,350 before adjustment on August 31. Journalize the adjusting entry for uncollectible accounts as of August 31. Reference: EX 9-9 Estimating allowance for doubtful accounts OBJ. 4 Waddell Industries has a past history of uncollectible accounts, as follows. Estimate the allowance for doubtful accounts, based on the aging of receivables schedule you completed in Exercise 9-8. Age Class Percent Uncollectible Not past due 3% 1-30 days past due 4 31-60 days past due 15 61-90 days past due 35 Over 90 days past due 80 EX 9-8 Aging of receivables schedule OBJ. 4 The accounts receivable clerk for Waddell Industries prepared the following partially completed aging of receivables schedule as of the end of business on August 31: The following accounts were unintentionally omitted from the aging schedule and not included in the preceding subtotals: Customer Balance Due Date Builders Industries 44,500 May 1 Elkhorn Company 21,000 June 20 Granite Creek Inc. 7,500 July 13 Lockwood Company 14,000 September 9 Teton Company 13,000 August 7 a. Determine the number of days past due for each of the preceding accounts as of August 31. b. Complete the aging of receivables schedule by adding the omitted accounts to the bottom of the schedule and updating the totals.arrow_forwardEntries for bad debt expense under the direct write-off and allowance methods Seaforth International wrote off the following accounts receivable as uncollectible for the year ending December 31: Customer Amount Kim Abel 21,550 Lee Drake 33,925 Jenny Green 27,565 Mike Lamb 19,460 Total 102,500 The company prepared the following aging schedule for its accounts receivable on December 31: Aging Class (Number of Days Past Due) Receivables Balance on December 31 Estimated Percent of Uncollectible Accounts 0-30 days 715,000 1% 31-60 days 310,000 2 61 -90 days 102,000 15 91-120 days 76,000 30 More than 120 days 97,000 60 Total receivables 1,300,000 A. Journalize the write-offs under the direct write-off method. B. Journalize the write-offs and the year-end adjusting entry under the allowance method, assuming that the allowance account had a beginning balance of 95,000 and the company uses the analysis of receivables method. C. How much higher (lower) would Seaforth International s net income have been under the allowance method than under the direct write-off method?arrow_forwardThe allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $844 of accounts receivable are uncollectible. Allowance for Doubtful Accounts has a debit balance of $101. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of a.$743 b.$945 c.$844 d.$101arrow_forward
- PROBLEM 1 A trial balance before adjustment included the following: Credit Debit P120,000 Accounts receivable Allowance for doubtful accounts 730 Sales P510,000 Sales returns and allowances 8,000 Give journal entries assuming that the estimate of uncollectibles is determined by taking (1) 5% of gross accounts receivable and (2) 1% of net salesarrow_forwardQuestion 14 Santagos Industries gathered the following information from its accounting records for the year ended December 31, 2019, prior to adjustment: Net credit sales for the year $730,000 Accounts receivable balance, Dec. 31, 2019 145,000 Allowance for doubtful accounts balance, Dec. 31, 2019 1,850 Cr. Santagos uses the allowance method of accounting for uncollectible accounts and estimates bad-debt expense at 1.5% of net credit sales. Required: a) Prepare the adjusting entry to record bad-debt expense on December 31, 2019. b) Determine the balance in allowance for doubtful accounts after the adjusting entry is prepared. c) Show how the receivables would be reported on the December 31, 2019, balance sheet for Santagos Industries.arrow_forwardQuestion Content Area Estimating Allowance for Doubtful Accounts Kirchhoff Industries has a past history of uncollectible accounts, as shown below. Age Class PercentUncollectible Not past due 1% 1-30 days past due 5 31-60 days past due 25 61-90 days past due 35 Over 90 days past due 50 Estimate the allowance for doubtful accounts, based on the aging of receivables schedule below. Kirchhoff IndustriesAging of Receivables Scheduleblank Customer Balance Not PastDue 1-30 DaysPast Due 31-60 DaysPast Due 61-90 DaysPast Due Over 90 DaysPast Due Subtotals 840,000 495,600 184,800 75,600 42,000 42,000 Conover Industries 18,100 18,100 Keystone Company 18,200 18,200 Moxie Creek Inc. 6,600 6,600 Rainbow Company 10,000 10,000 Swanson Company 23,100 23,100 Total receivables 916,000 518,700 194,800 82,200 60,200 60,100 Percentage uncollectible 1% 5% 25% 35% 50% Allowance for Doubtful…arrow_forward
- Exercise 9-13 (Algo) Percent of accounts receivable method LO P3 Mazie Supply Company uses the percent of accounts receivable method. On December 31, it has outstanding accounts receivable of $120,000, and it estimates that 2% will be uncollectible.Prepare the year-end adjusting entry to record bad debts expense under the assumption that the Allowance for Doubtful Accounts has:(a) a $2,040 credit balance before the adjustment.(b) a $600 debit balance before the adjustment.arrow_forward6. Which method of estimating uncollectible accounts does not take the previous balance in the allowance account in to consideration? a. Percentage of account receivable method b. All the options c. Account receivable aging method d. Percentage of sales methodarrow_forward31arrow_forward
- Problem 6-4: The Northrock Corporation The Northrock Corporation produced the following summary of its historical experience of write offs of Accounts Receivable (A/R) on October 31, 2021: Year A/R at Year end Uncollectible and written off in subsequent years 2018 14000 700 2019 10000 1000 2020 12000 600 2021 4000 200 Required 1. Calculate the percentage loss on Accounts Receivable for the period 2018 to 2021 by calculating total write offs over the period as a % of total A/R. Round your calculation to two decimal places. 2. Compute the balance for the Allowance for Doubtful accounts (rounded to the nearest $) on October 31, 2021 if Accounts Receivable on that date were 16000. Apply the % ending A/R method using the percentage calculated in part 1. 3. Scenario A: On October 31, 2021 the unadjusted Allowance for Doubtful Accounts was 160 credit. Prepare an adjusting entry to obtain the amount that you calculated in part 2. 4. Scenario B: On October 31, 2021 the unadjusted Allowance for…arrow_forwardanswer the followingarrow_forwardThe allowance method of estimating uncollectible accounts receivable based on an analysis of receivables shows that $656 of accounts receivable are uncollectible. Allowance for Doubtful Accounts has a debit balance of $193. The adjusting entry at the end of the year will include a credit to Allowance for Doubtful Accounts in the amount of Oa. $849 Ob. $656 Oc. $193 Od. $463arrow_forward
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