Exercise 7 7 Percent of receivables method L.O. P2
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Hecter Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis. |
| Days Past Due | |||||||||||||||||||
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| Total | 0 | 1 to 30 | 31 to 60 | 61 to 90 | Over 90 | ||||||||||||||
| Accounts receivable | $ | 190,000 | $ | 132,000 | $ | 30,000 | $ | 12,000 | $ | 6,000 | $ | 10,000 | |||||||
| Percent uncollectible | 1 | % | 2 | % | 4 | % | 7 | % | 12 | % | |||||||||
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| a. |
Estimate the balance of the Allowance for Doubtful Accounts assuming the company uses 3.5% of total accounts receivable to estimate uncollectibles, instead of the aging of receivables method. (Omit the “$” sign in your response.) |
| Allowance for doubtful accounts | $ |
| b. |
Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $300 credit. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit |
| Dec 31 | (Click to select)Accounts receivableSales expense and allowanceEntertainment expenseBad debts expenseStore suppliesNotes payableAllowance for doubtful accountsPrepaid insurance | ||
| (Click to select)Sales expense and allowanceStore suppliesAccounts receivableEntertainment expenseAllowance for doubtful accountsNotes payablePrepaid insuranceBad debts expense | |||
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| c. |
Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $200 debit. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit |
| Dec 31 | (Click to select)Accounts receivableStore suppliesSales expense and allowanceAllowance for doubtful accountsEntertainment expensePrepaid insuranceBad debts expenseNotes payable | ||
| (Click to select)Notes payableAllowance for doubtful accountsEntertainment expensePrepaid insuranceAccounts receivableBad debts expenseSales expense and allowanceStore supplies | |||
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Exercise 7 8 Writing off receivables L.O. P2
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Hecter Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis. |
| Days Past Due | |||||||||||||||||||
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| Total | 0 | 1 to 30 | 31 to 60 | 61 to 90 | Over 90 | ||||||||||||||
| Accounts receivable | $ | 190,000 | $ | 132,000 | $ | 30,000 | $ | 12,000 | $ | 6,000 | $ | 10,000 | |||||||
| Percent uncollectible | 1 | % | 2 | % | 4 | % | 7 | % | 12 | % | |||||||||
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| a. |
On February 1 of the next period, the company determined that $1,900 in customer accounts is uncollectible; specifically, $400 for Oxford Co. and $1,500 for Brookes Co. Prepare the journal entry to write off those accounts. (Omit the “$” sign in your response.) |
| Date | General Journal | Debit | Credit | ||||||||||||||||||||||||||||||
| Feb 1 | (Click to select)Advertising expenseAllowance for doubtful accountsAccounts receivable Brookes Co.Store suppliesAccounts receivable Oxford Co.Prepaid insuranceCashAccounts payable | ||||||||||||||||||||||||||||||||
| (Click to select)Store suppliesAdvertising expensePrepaid insuranceAccounts payableAccounts receivable Brookes Co.Accounts receivable Oxford Co.CashAllowance for doubtful accounts | |||||||||||||||||||||||||||||||||
| (Click to select)Accounts receivable Oxford Co.Prepaid insuranceAccounts receivable Brookes Co.CashAccounts payableStore suppliesAllowance for doubtful accountsAdvertising expense | |||||||||||||||||||||||||||||||||
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