The following transactions were completed by the Bronze gallery during the current fiscal year ended December 31:
June 6: Reinstated the account of Ian Netti, which had been written off in the preceding year as uncollectible. Journalized the receipt of $1945 cash in full payment of Ian's account.
July 19: Wrote off the $11,150 balance owed by Rancho Rigging Co., which is bankrupt.
August 13: Received 35% of the $20,000 balance owed by Santori Co., a bankrupt business, and wrote off the remainder as uncollectible.
Sept 2: Reinstated the account for Sheryl Capers, which had been written off 2 years earlier as uncollectible. Recorded the receipt of $3,170 cash in full payment.
Dec 31: Wrote off the following accounts as uncollectible (compound entry): Jacoba Co., $8390; Garcia Co., $2500; Summit Furniture, $6400; Jill DePuy, $1800.
Dec 31: Based on an analysis of the $960,750 of accounts receivable, it was estimated that $4200 will be uncollectible. Journalized the adjusting entry.
Instructions
1. Record the January 1 credit balance of $40000 in a T account for allowances for doubtful accounts.
2. Journalize the transactions. Post each entry that affects the following T accounts and determine new balances:
(allowance for doubtful accounts and bad debt expense) --
3. Determine the expected net realizable value of the accounts receivable as of Dec 31. --
4. Assuming that instead of basing the provision for uncollectible accounts on an estimated expense of 3/4 of 1% of the net sales of $6,000,000 for the year, determine the following: (a) bad debt expense for the year (b) balance in the allowance account after the adjustment of Dec 31 (c) expected net realizable value of the accounts receivable as of December 31.