Financial Accounting: An Integrated Statements Approach, 2nd Edition

The following transactions were completed by Clark Management Company during the current

fiscal year ended December 31:

Mar. 17 Received 70% of the $21,000 balance owed by Baxter Co., a bankrupt business, and

wrote off the remainder as uncollectible.

Apr. 20 Reinstated the account of Bart Tiffany, which had been written off in the preceding year

as uncollectible. Journalized the receipt of $4,875 cash in full payment of Tiffany’s

account.

July 29 Wrote off the $4,500 balance owed by Ski Time Co., which has no assets.

Oct. 31 Reinstated the account of Kirby Co., which had been written off in the preceding

year as uncollectible. Journalized the receipt of $7,750 cash in full payment of the

account.

Dec. 31 Wrote off the following accounts as uncollectible (compound entry): Maxie Co., $2,150;

Nance Co., $2,600; Powell Distributors, $3,500; J.J. Levi, $5,500.

31 Based on an analysis of the $657,250 of accounts receivable, it was estimated that

$13,500 will be uncollectible. Journalized the adjusting entry.

Instructions

1. Record the January 1 credit balance of $11,050 in a T-account for Allowance for Doubtful
   Accounts.


2. Journalize the transactions. Post each entry that affects the following selected T-accounts
   and determine 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 – 4 of 1% of the net sales of $5,350,000 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.

Zahovik Company supplies flies and fishing gear to sporting goods stores and outfitters through-

out the western United States. The accounts receivable clerk for Zahovik prepared the following

partially completed aging-of-receivables schedule as of the end of business on December 31, 2007:

388 Chapter 8 Receivables

Alternate Problem

8-1B

Entries related to uncollectible

accounts

Goal 4

3. $643,750

GENERAL LEDGER

Alternate Problem

8-2B

Aging of receivables; estimat-

ing allowance for doubtful

accounts

Goal 4

3. $80,646

ALTERNATE ACCOUNTING APPLICATION PROBLEMS

Alexandra

Fishery

Cutthroat

Sports

Customer Balance

15,000

5,500

Not

Past

Due

Days Past Due

1–30 31–60 61–90 91–120

15,000

Yellowstone

Sports

2,900

Subtotals 880,000 448,600 247,250 98,750 33,300 29,950

2,900

Over 120

5,500

22,150