Chapter 9, Problem 9.5P

Bad Debt Expense, Aging of Accounts Receivable. Journal Entry. Cho Sportswear, Ltd. developed an aged schedule of accounts receivable at the end of each year.

Cho Sportswear: Aged Schedule of Accounts Receivable

			Past Due
Customer	Current	1-30 Days	31-60 Days	61-90 Days	Over 90 Days	Totals
Ryoko Design Assosciates	$100,000	$23,800				$ 123,800
Marcy Fashions, Inc	657,000	198,000	$76,000			931,000
Conory Clothing				$456,000	$789,412	1,245,412
Lee Womensware	237,200	10,230	54,570	349,200		651,200
Bauer Brands, Ltd.	100,230	76,770		41,588	19,000	237,588
Totals	$1,094,430	$308,800	$130,570	$846,788	$808,412	$3,189,000

The company estimated an allowance for uncollectible accounts based on the following estimates

Aging Category	Allowance Provided
Current	5%
1 -30 days past due	9
31-60 days past due	20
61-90 days past due	55*
Over 90 days past due	80*

After a specific review of the company’s accounts receivable, Cho’s credit manager decided to provide a full allowance against all Bauer Brands’ balances that are more than 60 days past due. The percentage allowance is applied to the 61-90 days and over 90 days past due aging categories only after deducting the balances due from Bauer Brands.

Cho reported net credit sales of $45,000,000 for the current year. We present the company’s of accounts receivable and the allowance for uncollectible accounts:

Required

1. a. Compute the balance required in the allowance for uncollectible accounts at the end of the year.
2. b. Prepare the journal entry to record the bad debt provision for the current year.
3. c. Independent of your answer to part (b) prepare the journal entry to record the bad debt provision for the current year assuming that the allowance for uncollectible accounts had a $331,000 debit balance.
4. d. In the following year, Cho’s credit management decided to write off all accounts that were over 90 days past due. Prepare the journal entry.
5. e. After the write-offs recorded in part (d), assume that Conroy Clothing pays the entire balance due. Prepare the journal entries required to record the subsequent recovery of the Conroy Clothing receivables.