Scenario: You are the Accountant for WanneBee Corporation
WannaBee Corporation has $1,500,000 of Receivables on December 31, 2000. WannaBee uses the Allowance Method and historical data indicates that 7% of receivables become uncollectible. The end of year balance in the ADA is 0.
The following are the 2000 end of year receivables.
AR- Goodboy $25,000 AR-NannyNancy $250,000
AR-BusyBody $75,000 AR-AlphaBetCo $130,000
AR-DippyDo $55,000 AR-TipsyTurvy $98,000
AR-MerryMen $145,000 AR-HappyHart $289,000
AR-CurlyCues $211,000 AR-MityMan $47,000
AR-PrettyPenny $109,000 AR-JumpingJax $66,000
During 2001 the following events occurred:
Goodboy defaulted.
BusyBody declared bankruptcy but paid $19,000.
DippyDo paid the account in full.
MerryMen still owes $48,000.
CurlyCues has not answered the phone for 8 months(write it off)
PrettyPenny paid its account.
NannyNancy paid $150,000 and on November 21 made a 120 note at 4% APR for the remainder.
AlphaBetCo paid its account in full.
TipsyTurvy has closed its business.
HappyHart paid its bill.
MityMan still owes its account.
JumpingJax paid ½ its bill and will not pay the rest.
The Receivables balance at the end of the year is $2,235,000
Required -
(1) Prepare the Required Adjusting Journal Entry for December 31, 2000.
(2) Prepare journal entries for the accounts to be written off for 2001
(3) Prepare the Required Adjusting Journal Entry for December 31, 2001.