Financial Accounting
3rd Edition
ISBN: 9780133791129
Author: Jane L. Reimers
Publisher: Pearson Higher Ed
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Chapter 4, Problem 25EA
To determine
Determine the amount of
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The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2018, theallowance account had a credit balance of $75,000. Credit sales for 2018 totaled $2,400,000 and the year-endaccounts receivable balance was $490,000. During this year, $73,000 in receivables were determined to be uncollectible. Manda Panda anticipates that 3% of all credit sales will ultimately become uncollectible. The fiscal yearends on December 31.Required:1. Does this situation describe a loss contingency? Explain.2. What is the bad debt expense that Manda Panda should report in its 2018 income statement?3. Prepare the appropriate journal entry to record the contingency.4. What is the net accounts receivable value Manda Panda should report in its 2018 balance sheet?
Create a ledger of Account Receivable and ledger of AFDD to find the bad debt by using this information;
Alpha Company's accounts receivable and allowance for doubtful accounts balances were RM100000 and RM14000 (credit) respectively, at the beginning of 2012. During 2012, a customer defaults on a RM12000 balance related to goods purchased during 2011. By the end of the year, the company had mad credit sales of RM2400000 and collected RM2200000 on account. Estimates 1 percent of its credit sales will default.
The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2016, the allowance account had a credit balance of $75,000. Credit sales for 2016 totaled $2,400,000 and the year-end accounts receivable balance was $490,000. During this year, $73,000 in receivables were determined to be uncollectible. Manda Panda anticipates that 3% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31. Required: 1. Does this situation describe a loss contingency? Explain. 2. What is the bad debt expense that Manda Panda should report in its 2016 income statement? 3. Prepare the appropriate journal entry to record the contingency. 4. What is the net realizable value (book value) Manda Panda should report in its 2016 balance sheet?
Chapter 4 Solutions
Financial Accounting
Ch. 4 - Prob. 1YTCh. 4 - Prob. 2YTCh. 4 - Suppose at the end of the year Pendleton Corp.s...Ch. 4 - Prob. 4YTCh. 4 - Prob. 5YTCh. 4 - Prob. 6YTCh. 4 - Prob. 7YTCh. 4 - Prob. 1QCh. 4 - Prob. 2QCh. 4 - Prob. 3Q
Ch. 4 - Prob. 4QCh. 4 - What does true cash balance refer to?Ch. 4 - Identify and explain the financial statements on...Ch. 4 - Describe how accounts receivable arise. What does...Ch. 4 - Prob. 8QCh. 4 - Define net realizable value, book value, and...Ch. 4 - Explain the difference between the direct...Ch. 4 - If a company uses the allowance method of...Ch. 4 - Describe the two allowance methods used to...Ch. 4 - Which method of calculating the allowance for...Ch. 4 - Which method of calculating the allowance for...Ch. 4 - What are the advantages and disadvantages of...Ch. 4 - What is the difference between accounts receivable...Ch. 4 - What is the formula to calculate the accounts...Ch. 4 - How does a firm use its accounts receivable...Ch. 4 - Prob. 19QCh. 4 - Prob. 20QCh. 4 - Prob. 1MCQCh. 4 - Prob. 2MCQCh. 4 - Prob. 3MCQCh. 4 - Prob. 4MCQCh. 4 - Prob. 5MCQCh. 4 - Prob. 6MCQCh. 4 - Prob. 7MCQCh. 4 - Prob. 8MCQCh. 4 - Prob. 9MCQCh. 4 - Prob. 1SEACh. 4 - Prob. 2SEACh. 4 - Prob. 3SEACh. 4 - Prob. 4SEACh. 4 - Prob. 5SEACh. 4 - Prob. 6SEACh. 4 - Prob. 7SEACh. 4 - Prob. 8SEACh. 4 - Prob. 9SEACh. 4 - Prob. 10SEBCh. 4 - Prob. 11SEBCh. 4 - Prob. 12SEBCh. 4 - Prob. 13SEBCh. 4 - Prob. 14SEBCh. 4 - Prob. 15SEBCh. 4 - Prob. 16SEBCh. 4 - Prob. 17SEBCh. 4 - Prob. 18SEBCh. 4 - Prob. 19EACh. 4 - Prob. 20EACh. 4 - Prob. 21EACh. 4 - Prob. 22EACh. 4 - Prob. 23EACh. 4 - Prob. 24EACh. 4 - Prob. 25EACh. 4 - Prob. 26EACh. 4 - Prob. 27EACh. 4 - Prob. 28EACh. 4 - Prob. 29EACh. 4 - Prob. 30EACh. 4 - Prob. 31EACh. 4 - Prob. 32EBCh. 4 - Prob. 33EBCh. 4 - Prob. 34EBCh. 4 - Prob. 35EBCh. 4 - Prob. 36EBCh. 4 - Prob. 37EBCh. 4 - Prob. 38EBCh. 4 - Prob. 39EBCh. 4 - Prob. 40EBCh. 4 - Prob. 41EBCh. 4 - Prob. 42EBCh. 4 - Prob. 43EBCh. 4 - Prob. 44EBCh. 4 - Prob. 45PACh. 4 - Prob. 46PACh. 4 - Prob. 47PACh. 4 - Prob. 48PACh. 4 - Prob. 49PACh. 4 - Prob. 50PACh. 4 - Prob. 51PACh. 4 - Prob. 52PACh. 4 - Prob. 53PBCh. 4 - Prob. 54PBCh. 4 - Prob. 55PBCh. 4 - Prob. 56PBCh. 4 - Prob. 57PBCh. 4 - Prob. 58PBCh. 4 - Prob. 59PBCh. 4 - Prob. 60PBCh. 4 - Prob. 1FSACh. 4 - Prob. 2FSACh. 4 - The following information has been adapted from...Ch. 4 - Prob. 1CTPCh. 4 - Prob. 2CTPCh. 4 - The information given here was taken from Yahoo!...Ch. 4 - Prob. 1IECh. 4 - Prob. 2IECh. 4 - The information given here was taken from Yahoo!...
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- Blossom Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $310000 and credit sales are $3110000. Management estimates that 4% of accounts receivable will be uncollectible. What adjusting entry will Blossom Company make if the Allowance for Doubtful Accounts has a credit balance of $3100 before adjustment?arrow_forwardGG Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $700,000 and credit sales are $2,500,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Company make to record the bad debts expense? Select one: a. Bad Debt Expense .25,000 Allowance for Doubtful Accounts 25,000 b. Bad Debt Expense.... .32,000 Accounts Receivable 32,000 C. Bad Debt Expense .32,000 Allowance for Doubtful Accounts 32,000 d. The answer does not exist e. Bad Debt Expense ..... 25,000 Accounts Receivable 25,000 HIBA F1 F2 F3 F4 F5 B/O F6 F7 F8 F9 F10 图 PRTSC SYSRQ F11 F12 # $ 4 & * 3 6 8 9 НOME 7 PGUP E Y ! ق 4 D. F H J K END PGON w. Rarrow_forwardNichols Company uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 4% of accounts receivable and 1% of credit sales will be uncollectible. What adjusting entry will Nichols Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment? Group of answer choices DR Bad Debt Expense and CR Allowance for Doubtful Accounts $10,000 DR Bad Debt Expense and CR Allowance for Doubtful Accounts for $7,500 DR Bad Debt Expense and CR Accounts Receivable for $7,500 DR Bad Debt Expense and CR Allowance for Doubtful Accounts for $7,000arrow_forward
- The Accounts Receivable balance and Allowance for Bad Debts for Signature Lamp Company at December 31, 2017, was $10,800 and $2,000 (credit balance), respectively. During 2018, Signature Lamp Company completed the following transactions:a. Sales revenue on account, $273,400 (ignore Cost of Goods Sold).b. Collections on account, $223,000.c. Write-offs of uncollectibles, $5,900. Post the transactions to the Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense T-accounts, and determine the ending balance of each account. Journalize Signature Lamp’s adjustment to record bad debts expense assuming Hilltop estimates bad debts as 10% of accounts receivable. Post the adjustment to the appropriate T-accounts.arrow_forwardRecord the write off for bad debts based on the this information: Alpha Company's accounts receivable and allowance for doubtful accounts balances were RM100000 and RM14000 (credit) respectively, at the beginning of 2012. During 2012, a customer defaults on a RM12000 balance related to goods purchased during 2011. By the end of the year, the company had mad credit sales of RM2400000 and collected RM2200000 on account. Estimates 1 percent of its credit sales will default.arrow_forwardPina Colada Corp. uses the percentage of receivables method for recording bad debts expense. The accounts receivable balance is $270000 and credit sales are $2710000. Management estimates that 3% of accounts receivable will be uncollectible. What adjusting entry will Pina Colada Corp. make if the Allowance for Doubtful Accounts has a credit balance of $2700 before adjustment?arrow_forward
- Valli Company uses the percentage of sales method for recording bad debts expense. For the year, cash sales are $700,000 and credit sales are $2,500,000. Management estimates that 1% is the sales percentage to use. What adjusting entry will Valli Company make to record the bad debts expense? Select one: a. Bad Debt Expense 32,000 Accounts Receivable 32,000 b. The answer does not exist c. Bad Debt Expense 25,000 Accounts Receivable 25,000 d. Bad Debt Expense 25,000 Allowance for Doubtful Accounts 25,000 e. Bad Debt Expense 32,000 Allowance for Doubtful Accounts 32,000arrow_forward1. Kinney Corporation estimates its uncollectible accounts as a percentage of its credit sales. The rate it uses is 3% and in 2018, its credit sales were $1,500,000. Required: a. Prepare journal entries to record the bad debts expense for the year. b. If Allowance for an uncollectible account has a credit balance of $60,000 before entries in (a) above, show how Accounts Receivable will be presented in the Balance Sheet of Kinney Corporation.arrow_forwardDorothy Company uses the percentage-of-receivables method for recording bad debt expense. The Accounts Receivable balance is $250,000 and credit sales are $1,000,000. Management estimates that 6% of accounts receivable will be uncollectible. What adjusting entry will Dorothy Company make if the Allowance for Doubtful Accounts has a credit balance of $2,500 before adjustment?arrow_forward
- Use the following information to answer Exercises E8-18 and E8-19. January 1, 2018, Hilltop Flagpoles had Accounts Receivable of $28,000, and Allowance for Bad Debts had a credit balance of $3,000. During the year, Hilltop Flagpoles recorded the following; Sales of $185,000 ($164,000 on account; $21,000 for cash). Ignore Cost of Goods Sold. Collections on account, $135,000. Write-offs of uncollectible receivables, $2,30p. Accounting for uncollectible accounts using the allowance method (percent-of-sales) and reporting receivables on the balance sheet Requirements Journalize Hilltop’s transactions that occurred during 2018. The company uses the allowance method. Post Hilltop’s transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts. Journalize Hilltops adjustment to record bad debts expense assuming Hilltop estimates bad debts as 3% of credit sales. Post the adjustment to the appropriate T-accounts. Show how Hilltop Flagpoles will report net accounts receivable…arrow_forwardJunko Enterprises uses the percentage of receivables method for estimating bad debts. At 1/1/23, Junko Enterprises had a credit balance in Allowance for Bad Debts of $900,000. Prepare journal entries for the following events: a) On Oct. 2, 2023, Junko realized that a specific account receivable of $920,000 had gone bad and had to be written off. b) An account receivable of $50,000 was collected on Oct. 25, 2023. This account had previously been written off as a bad debt in 2022. c) Junko has determined that Allowance for Bad Debts would be $970,000 at the end of 2023.arrow_forwardUse the following information to answer Exercises E8-18 and E8-19. January 1, 2018, Hilltop Flagpoles had Accounts Receivable of $28,000, and Allowance for Bad Debts had a credit balance of $3,000. During the year, Hilltop Flagpoles recorded the following; Sales of $185,000 ($164,000 on account; $21,000 for cash). Ignore Cost of Goods Sold. Collections on account, $135,000. Write-offs of uncollectible receivables, $2,30p. Accounting for uncollectible accounts using the allowance method (percent-of-receivables) and reporting receivables on the balance sheet Requirements Journalize Hilltop’s transactions that occurred during 2018. The company uses the allowance method. Post Hilltop’s transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts. Journalize Hilltop’s adjustment to record bad debts expense assuming Hilltop estimates bad debts as 10% of accounts receivable. Post the adjustment to the appropriate T-accounts. Show how Hilltop Flagpoles will report net…arrow_forward
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