Accounts receivable Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business. Bad debt expense: Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense. Aging of receivables: A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method. Allowance method: It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account. Direct write-off method: This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible. To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

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Answer 1

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

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On January 1, 2024, Wright Transport sold four school buses to the Elmira School District. In exchange for the buses, Wright received a note requiring payment of $532,000 by Elmira on December 31, 2026. The effective interest rate is 8%. Note: Use appropriate factor(s) from the tables provided. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) Required: How much sales revenue would Wright recognize on January 1, 2024, for this transaction? Prepare journal entries to record the sale of merchandise on January 1, 2024 (omit any entry that might be required for the cost of the goods sold), the December 31, 2024, interest accrual, the December 31, 2025, interest accrual, and receipt of payment of the note on December 31, 2026.

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $28,000 at the beginning of 2024. No previously written-off accounts receivable were reinstated during 2024. At 12/31/2024, gross accounts receivable totaled $466,700, and prior to recording the adjusting entry to recognize bad debts expense for 2024, the allowance for uncollectible accounts had a debit balance of 51,300. Required: Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2024. Determine the amount of accounts receivable written off during 2024. If Johnson instead used the direct write-off method, what would bad debt expense be for 2024?

Johnson Company calculates its allowance for uncollectible accounts as 10% of its ending balance in gross accounts receivable. The allowance for uncollectible accounts had a credit balance of $28,000 at the beginning of 2024. No previously written-off accounts receivable were reinstated during 2024. At 12/31/2024, gross accounts receivable totaled $466,700, and prior to recording the adjusting entry to recognize bad debts expense for 2024, the allowance for uncollectible accounts had a debit balance of 51,300. Required: What was the balance in gross accounts receivable as of 12/31/2023? What journal entry should Johnson record to recognize bad debt expense for 2024? Assume Johnson made no other adjustment of the allowance for uncollectible accounts during 2024. Determine the amount of accounts receivable written off during 2024. If Johnson instead used the direct write-off method, what would bad debt expense be for 2024?

Answer 2

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Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

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Answer 3

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

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Answer 4

Question

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

Expert Solution & Answer

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See solution

Answer 5

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

Answer 6

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

Answer 7

Chapter 8, Problem 8.5AP

(a)

To determine

Accounts receivable

Accounts receivable refers to the amounts to be received within a short period from customers upon the sale of goods and services on account. In other words, accounts receivable are amounts customers owe to the business. Accounts receivable is an asset of a business.

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Aging of receivables:

A method of determining the estimated uncollectible receivables based on the age of individual accounts receivable is known as aging of receivables method.

Allowance method:

It is a method for accounting bad debt expense, where amount of uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Direct write-off method:

This method does not make allowance or estimation for uncollectible accounts, instead this method directly write-off the actual uncollectible accounts by debiting bad debt expense, and by crediting accounts receivable. Under this method, accounts would be written off only when the receivables from a customer remain uncollectible.

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

Answer 8

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

Answer 9

(b)

To determine

To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

Answer 10

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

Answer 11

(c)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

Answer 12

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

Answer 13

(d)

To determine

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

Answer 14

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

Answer 15

(e)

To determine

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

Answer 16

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Answer 17

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Answer 19

Ch. 8 - What is the difference between an account...Ch. 8 - What are some common types of receivables other...Ch. 8 - What are the essential features of the allowance...Ch. 8 - Prob. 4Q Ch. 8 - Prob. 5Q Ch. 8 - 6. What types of receivables does Tootsie Roll...Ch. 8 - Prob. 7Q Ch. 8 - Prob. 8Q Ch. 8 - Prob. 20Q Ch. 8 - Prob. 21Q

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To prepare: The adjusting entry for recording the bad debt expenses at December 31, 2014.

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible.

To prepare: The journal entry to write-off $2,100 of accounts receivable as uncollectible, under direct write-off method.

To describe: The advantages of using allowance method rather than direct write-off method in accounting for uncollectible accounts.

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