Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 8 Receivables 385

Aug. 29 Reinstated the account of Louis Sabo, which had been written off two years earlier as

uncollectible. Recorded the receipt of $2,400 cash in full payment.

Dec. 31 Wrote off the following accounts as uncollectible (compound entry): Dailey Co., $10,050;

Sun Co., $7,260; Zheng Furniture, $3,775; Carey Wenzel, $2,820.

31 Based on an analysis of the $875,250 of accounts receivable, it was estimated that

$38,000 will be uncollectible. Journalized the adjusting entry.

Instructions

1. Record the January 1 credit balance of $32,000 in a T-account for Allowance for Doubtful
   Accounts.


2. Journalize the transactions. Post each entry that affects the following T-accounts and deter-
   mine the new balances:

Allowance for Doubtful Accounts

Bad Debt Expense

3. Determine the expected net realizable value of the accounts receivable as of December 31.


4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of
   receivables, the adjusting entry on December 31 had been based on an estimated expense
   of^1 – 2 of 1% of the net sales of $7,750,000 for the year, determine the following:
   a. Bad debt expense for the year.
   b. Balance in the allowance account after the adjustment of December 31.
   c. Expected net realizable value of the accounts receivable as of December 31.

Miller Wigs Company supplies wigs and hair care products to beauty salons throughout

California and the Pacific Northwest. The accounts receivable clerk for Miller Wigs prepared the

following partially completed aging-of-receivables schedule as of the end of business on

December 31, 2007:

Problem 8-2A

Aging of receivables; estimat-
ing allowance for doubtful
accounts

Goal 4

3. $65,038.50

Daytime Beauty

Blount Wigs

Customer Balance

$20,000

$11,000

Not

Past

Due

Days Past Due

1–30 31–60 61–90 91–120

$20,000

Zabka’s 2,900

Subtotals 780,000 398,600 197,250 98,750 33,300 29,950

2,900

Over 120

$11,000

22,150

The following accounts were unintentionally omitted from the aging schedule:

Customer Due Date Balance

Houseal Uniquely Yours July 1, 2007 $ 900

Country Designs Aug. 2, 2007 4,000

Treat’s Sept. 9, 2007 1,200

Molina’s Beauty Store Sept. 29, 2007 1,100

Ginburg Supreme Oct. 10, 2007 1,500

Steve’s Hair Products Oct. 17, 2007 600

Hairy’s Hair Care Oct. 31, 2007 2,000

VanDiver’s Images Nov. 18, 2007 700

Lopez Hair Styling Nov. 28, 2007 1,800

Josset Ritz Nov. 30, 2007 3,500

Cool Designs Dec. 1, 2007 1,000

Buttram Images Jan. 3, 2008 6,200