Financial Accounting
4th Edition
ISBN: 9781259307959
Author: J. David Spiceland, Wayne M Thomas, Don Herrmann
Publisher: McGraw-Hill Education
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Chapter 5, Problem 5.4AP
Record transactions related to uncollectible accounts (LO5–4, 5–5)
Pearl E. White Orthodontist specializes in correcting misaligned teeth. During 2018, Pearl provides services on account of $590,000. Of this amount, $80,000 remains receivable at the end of the war. An aging schedule as of December 31, 2018, is provided below.
| Age Group | Amount Receivable | Estimated Percent Uncollectible |
| Not yet due | $40,000 | 4% |
| 0–90 days past due | 16,000 | 20% |
| 91–180 days past due | 11,000 | 25% |
| More than 180 days past due | 13,000 | 80% |
| Total | $80,000 |
Required:
1. Calculate the allowance for uncollectible accounts.
2. Record the December 31, 2018, adjustment, assuming the balance of Allowance for Uncollectible Accounts before adjustment is $5,000 (credit).
3. On July 19, 2019, a customer’s account balance of $8,000 is written off as uncollectible. Record the write-off.
4. On September 30, 2019, the customer whose account was written off in Requirement 3 unexpectedly pays the full amount. Record the cash collection.
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Accounting for uncollectible accounts using the allowance method (aging-of-receivables) and reporting receivables on the balance sheet.
At September 30, 2018, the accounts of Roxbury Medical Center (RMC) include the following:
Accounts Receivable
$154,000
Allowance for Bad Debts (credit balance)
3,700
During the last quarter of 2018, RMC completed the following selected transactions:
• Sales on account, $465,000. Ignore Cost of Goods Sold.
• Collections on account, $441,800.
• Wrote off accounts receivable as uncollectible: Jenkins, Co., $1,900; Sony, $800; and Smith, Inc., $500
• Recorded bad debts expense based on the aging of accounts receivable, as follows:
Age of Accounts
1–30 Days
31–60 Days
61–90 Days
Over 90 Days
Accounts Receivable
$ 97,000
$ 37,000
$ 17,000
$ 14,000
Estimated percent uncollectible
0.2%
3.5%
29%
32%
Requirements
Open T-accounts for Accounts Receivable and Allowance for…
Mercy Hospital has the following balances on December 31, 2024, before any adjustment: Accounts Receivable = $70,000; Allowance for Uncollectible Accounts = $1,400 (credit). Mercy estimates uncollectible accounts based on an aging of accounts receivable as shown below.
Age Group
Amount Receivable
Estimated Percent Uncollectible
Not yet due
$50,000
15%
0 to 30 days past due
11,000
20%
31 to 90 days past due
8,000
45%
More than 90 days past due
1,000
85%
Total
$70,000
Required:1. Estimate the amount of uncollectible receivables.2. Record the adjusting entry for uncollectible accounts on December 31, 2024.3. Calculate net accounts receivable reported in the balance sheet.
Mercy Hospital has the following balances on December 31, 2021, before any adjustment: Accounts Receivable = $70,000; Allowance for Uncollectible Accounts = $1,400 (credit). Mercy estimates uncollectible accounts based on an aging of accounts receivable as shown below.
Age Group
AmountReceivable
Estimated PercentUncollectible
Not yet due
$50,000
15%
0 –30 days past due
11,000
20%
31– 90 days past due
8,000
45%
More than 90 days past due
1,000
85%
Total
$70,000
Required:1. Estimate the amount of uncollectible receivables.2. Record the adjustment for uncollectible accounts on December 31, 2021.3. Calculate net accounts receivable.
Chapter 5 Solutions
Financial Accounting
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