Accounting Chapter 7
Bailey Company has $200,000 of accounts receivable on December 31. The unadjusted balance of its Allowance for Doubtful Accounts is a debit of $9,000. An aging of its accounts receivable suggests that $12,000 of its receivables will be uncollectible. The amount that should be debited to Bad Debt Expense and credited to Allowance for Doubtful Accounts in the year-end adjusting entry is...
$21,000 (12,000+9,000)
On December 31, management had determined that it would not be able to collect the $1,200 owed to it by one of its customers. On Jan 15 in the next year, a check in the amount of $600 was unexpectedly received from this customer. Management does not expect any future collections from this customer. The company uses the allowance method to account for its uncollectible accounts. Prepare the necessary journal entry on January 15 to record the events by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns. Prepare two separate journal entries. The first journal entry is to record the reinstatement of the account receivable and the second is to record the receipt of cash.
1. Accounts Receivable: Debit $600 Allowance for doubtful accounts: Credit $600 2. Cash: Debit $600 Accounts Receivable: Credit $600
The allowance method of accounting for bad debts has the following advantages over the direct write-off method including:
1. Records estimated bad debts expense in the period when the related sales are recorded 2. Reports accounts receivable on the balance sheet at the estimated amount of cash to be collected
Sellers allow customers to use credit cards for all of the following reasons:
1. Seller does not have to decide who gets credit 2. Seller accepts the risk for extending credit to customers 3. seller receives cash sooner than if credit is granted directly to customers 4. May allow seller to increase sales volume
On December 1, after making a concerted effort, management determines that it will be unable to collect $1,200 owed to it by one of its customers. This company uses the allowance method to account for uncollectible accounts. **Explain how the Journal Entry would look like**
Allowance for Doubtful Accounts: Debit 1,200 Accounts Receivable: Credit 1,200
Cosmo Company reported credit sales of $345,000 for the calendar year in its first year of operations. At December 31, customers buying on credit owed $35,000 to the company. Based on the experience of similar businesses, management estimates that $3,500 of its accounts receivable will be uncollectible. **Explain how the Journal Entry would look like**
Bad Debit Expense: Debit 3,500 Allowance for Doubtful Accounts: Credit 3,500
Carlton Company uses the percent of sales method to estimate its bad debt expense. Based on past experience, the company estimates 2 percent of credit sales to be uncollectible. At the end of the current year, the company's unadjusted trial balance shows Accounts Receivable of $245,000 and Credit Sales of $900,000. Prepare the necessary December 31 adjusting entry by selecting the account names from the drop-down menus and entering the dollar amounts in the debit or credit columns.
Bad Debit expense: Debit $18,000 (900,000 X 0.02) Allowance for doubtful accounts: Credit $18,000
When customers have a company issued credit card what do you debit and what do you credit on the balance sheet?
Debit: Accounts Receivable Credit: Interest Revenue
When customers have their own credit cards what do you debit and what do you credit on the balance sheet?
Debit: Accounts Receivable Credit: Sales
The goal for the accounts receivable methods is to adjust the Allowance for Doubtful Accounts balance so that...
The adjusted balance is equal to the estimate of the uncollectible accounts receivable
The supplementary record providing information to each customer is called the?
accounts receivable ledger
