Financial Accounting: The Impact on Decision Makers
10th Edition
ISBN: 9781305654174
Author: Gary A. Porter, Curtis L. Norton
Publisher: Cengage Learning
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Chapter 7, Problem 7.1P
Allowance Method for Accounting for
At the beginning of 2016, EZ Tech Company’s
Required
- Prepare summary
journal entries related to the sale, collections, and write-offs of accounts receivable during 2016. - Prepare journal entries to recognize bad debts assuming that (a) bad debts expense is 3% of credit sales and (b) amounts expected to be uncollectible are 6% of the year-end accounts receivable.
- What is the net realizable value of accounts receivable on December 31, 2016, under each assumption in part (2)?
- What effect does the recognition of bad debts expense have on the net realizable value? What effect does the write-off of accounts have on the net realizable value?
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The following information is extracted from Shelton Corporation’s accounting records at the beginning of 2016: Accounts Receivable $64,000 Allowance for Doubtful Accounts 1,100 (credit) During 2016, sales on credit amounted to $568,000, $559,000 was collected on outstanding receivables and $2,500 of receivables were written off as uncollectible. On December 31, 2016, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.
1. Prepare the journal entry necessary to record Shelton’s estimate of bad debt expense for 2016.
2. Prepare the Accounts Receivable section of Shelton’s December 31, 2016, balance sheet.
3. Compute Shelton’s receivables turnover. (Round to one decimal place.)
The following information is extracted from Shelton Corporation’s accounting records at the beginning of 2016:
Accounts Receivable
$63,000
Allowance for Doubtful Accounts
1,400
(credit)
During 2016, sales on credit amounted to $575,000, $557,400 was collected on outstanding receivables and $2,600 of receivables were written off as uncollectible. On December 31, 2016, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.
Required:
1.
Prepare the journal entry necessary to record Shelton’s estimate of bad debt expense for 2016.
2.
Prepare the Accounts Receivable section of Shelton’s December 31, 2016, balance sheet.
3.
Compute Shelton’s receivables turnover. (Round to one decimal place.)
4.
If Sheldon uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?
At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $143,000, and the balance in Allowance for Doubtful Accounts was $2,450. EZ Tech's sales in 2017 were $1,070,000, 80% of which were on credit. Collections on account during the year were $690,000. The company wrote off $4,000 of uncollectible accounts during the year.
Allowance Method for Accounting for Bad Debts
At the beginning of 2017, EZ Tech Company's Accounts Receivable balance was $143,000, and the balance in Allowance for Doubtful Accounts was $2,450. EZ Tech's sales in 2017 were $1,070,000, 80% of which were on credit. Collections on account during the year were $690,000. The company wrote off $4,000 of uncollectible accounts during the year.
Required:
1. Identify and analyze the sales during 2017.
Activity
Operating
Accounts
Cash Increase, Accounts Receivable Increase, Sales Revenue Increase
Statement(s)
Balance Sheet and Income Statement
How does this entry affect the…
Chapter 7 Solutions
Financial Accounting: The Impact on Decision Makers
Ch. 7 - Allowance Method of Accounting for Bad...Ch. 7 - Notes Receivable On September 1, 2016, Dougherty...Ch. 7 - Prob. 7.19ECh. 7 - Prob. 7.19MCECh. 7 - Allowance Method for Accounting for Bad Debts At...Ch. 7 - Allowance Method for Accounting for Bad Debts At...Ch. 7 - Reading 3M Companys Balance Sheet: Accounts...
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