Concept explainers
Allowance for Bad Accounts Installment Jewelry Company has been in business for 5 years but has never had its financial statements audited. Engaged to audit them for 2019, you find that the company’s
On your recommendation, the company agrees to revise its accounts for 2019 to give effect to bad account treatment on the allowance basis. The allowance is to be based on a percentage of credit sales that is derived from the experience of prior years. Statistics for the past 5 years are shown in the following table:
Required:
Prepare the
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Chapter 6 Solutions
Intermediate Accounting: Reporting And Analysis
- On January 1, 2019, Northfield Corporation becomes delinquent on a 100,000, 14% note to First National Bank, on which 16,651 of interest has accrued. On January 2, 2019, the bank agrees to restructure the note. It forgives the accrued interest, extends the repayment date to December 31, 2021, and reduces the interest rate to 10%. Required: Prepare a schedule for Northfield to compute the annual interest expense in regard to the preceding note for each year of the restructuring agreement.arrow_forwardThe following information is available for Reagan Company: Allowance for doubtful accounts at December 31, 2020 (beginning balance) $ 8,000 Accounts receivable deemed worthless and written off during 2021 9,000 As a result of a review and aging of accounts receivable it has been determined that an allowance for doubtful accounts of $5,500 is needed at December 31, 2021. What amount should Reagan record as "bad debt expense" for the year ended December 31, 2021? $4.500 $5.500 $6.500 13.500arrow_forwardFrom inception of operations to December 31, 2020, Flounder Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Flounder’s usual credit terms are net 30 days.The balance in Allowance for Doubtful Accounts was $119,600 (Cr.) at January 1, 2020. During 2020, credit sales totaled $8,280,000, the provision for doubtful accounts was determined to be $165,600, $82,800 of bad debts were written off, and recoveries of accounts previously written off amounted to $13,800. Flounder installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows.…arrow_forward
- Isbell Company’s December 31, 2024 unadjusted trial balance reports a $1,000 credit balance in Allowance for Doubtful Accounts. As a result of a review and aging of accounts receivable at that time, it has been determined that an allowance for doubtful accounts of $5,500 is needed at December 31, 2024. What amount should Isbell record as Bad Debt Expense for the year ended December 31, 2024? Select one: $13,500 $5,500 $4,500 $6,500arrow_forwardFrom inception of operations to December 31, 2020, Flounder Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Flounder’s usual credit terms are net 30 days.The balance in Allowance for Doubtful Accounts was $119,600 (Cr.) at January 1, 2020. During 2020, credit sales totaled $8,280,000, the provision for doubtful accounts was determined to be $165,600, $82,800 of bad debts were written off, and recoveries of accounts previously written off amounted to $13,800. Flounder installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows.…arrow_forwardS Allowance Method Jada uses the allowance method. The balance of the Allowance for Doubtful Accounts at December 1 was $950. The following transactions occurred: Dec 12 Jada determines that it cannot collect $1,500 of its accounts receivable from Lilo Company 27 Lilo unexpectedly pays $200 on its account. Jada records its recovery of this bad debt. Instructions: (1) Prepare journal entries for the above transactions under the applicable method. (2) Post the transactions above and determine the ending balance in Allowance for Doubtful Accounts. (3) Assuming bad debts are expected to be 5% of accounts receivable, prepare the adjusting journal entry at December 31. (1) Prepare journal entries for the above transactions under the applicable method. Dec 12 Select VALUE Select Dec 27 Select Select VALUE VALUE VALUE Dec 27 Select VALUE Select VALUEarrow_forward
- From inception of operations to December 31, 2025, Swifty Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Swifty's usual credit terms are net 30 days. The balance in Allowance for Doubtful Accounts was $144,200 (Cr.) at January 1, 2025. During 2025, credit sales totaled $9,170,300. the provision for doubtful accounts was determined to be $183,406, $91,703 of bad debts were written off, and recoveries of accounts previously written off amounted to $19,570. Swifty installed a computer system in November 2025, and an aging of accounts receivable was prepared for the first time as of December 31, 2025. A summary of the aging is as follows.…arrow_forwardFrom inception of operations to December 31, 2020, Flounder Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no-year-end adjustments to the allowance account were made. Flounder’s usual credit terms are n/30 days. The balance in allowance for doubtful accounts was $119,600 (cr.) on January 1, 2020. During 2020, credit sales totaled $8,280,000, the provision for doubtful accounts was determined to be $165,600, $82,800 of bad debts were written off, and recoveries of accounts previously written off amounted to $13,800. Flounder installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of aging is as follows:…arrow_forwardFrom inception of operations to December 31, 2020, Fortner Corporation provided for uncollectible accounts receivable under the allowance method. The provisions are recorded, based on analyses of customers with different risk characteristics. Bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account, and no year-end adjustments to the allowance account were made. Fortner’s usual credit terms are net 30 days. The balance in Allowance for Doubtful Accounts was $130,000 (Cr.) at January 1, 2020. During 2020, credit sales totaled $9,000,000, the provision for doubtful accounts was determined to be $180,000, $90,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $15,000. Fortner installed a computer system in November 2020, and an aging of accounts receivable was prepared for the first time as of December 31, 2020. A summary of the aging is as follows.…arrow_forward
- Bugler Corp had the following transactions for 2021 related to bad debts. Bugler began 2021 with $20,500 in their Allowance for Doubtful Accounts. a. Record the following transactions in the general journal provided. Feb 4 Wrote off the balance of Cooper Company, $3,500 Jun 12 Wrote off the balance of Jones Corp., $6,500 Aug 9 Recovered $1,200 from Wilson Company whose account was written off in 2020 Aug 10 Deposited the check received from Wilson for the recovered amount written off Nov 21 Wrote off the balance of Atlantic Company, $4,000 Dec 31 Estimated uncollectible accounts as 2% of credit sales. Credit sales were $775,000 b. Calculate the amount in the Allowance for Doubtful Accounts at the end of 2021. Enter the ending balance here…arrow_forwardThe following transactions have taken place for Accustart Corporation. The company has a December 31 fiscal year end and Accustart does not maintain a separate Allowance for Doubtful Notes Receivable account. 2024 May 1 Nov. 1 Nov. 30 Dec. 31 Dec. 31 2025 Jan. 31 Feb. 28 May 1 Received a $4,800, 1-year, 10% note in exchange for an outstanding account receivable from S. Dolan. Interest is due at the maturity of the note. Loaned $69,600 cash to B. Younger on a 4-month, 8% note. Interest is due at the end of each month. Received the interest due from B. Younger. Received the interest due from B. Younger. Accrued interest income on notes receivable. Received the interest due from B. Younger. Younger also repaid 70% of the principal Calance owing on the note at this time. Wrote off the balance of the B. Younger note as Younger has defaulted. Future payments are not expected. The interest due for the month of February was not collected. Received principal plus interest on the S. Dolan note.…arrow_forwardInstructions General Journal 1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense on December 31. The following information is extracted from Shelton Corporation's accounting records at the beginning of 2019: Chart of Accounts Accounts Receivable $71,000 General Journal Instructions CHART OF ACCOUNTS Allowance for Doubtful Accounts 1,200 (credit) Shelton Corporation PAGE 1 During 2019, sales on credit amounted to $568,000, $553,600 was collected on outstanding receivables and $2,600 of receivables were written General Ledger off as uncollectible. On December 31, 2019, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance. GENERAL JOURNAL ASSETS REVENUE DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT Required: 111 Cash 411 Sales Revenue 1. 1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense for 2019. 121 Accounts Receivable 2 2. Prepare the Accounts Receivable section of Shelton's…arrow_forward
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