Question

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company's fiscal year-end. The 2020 balance sheet disclosed the following: Current assets Receivables, net of allowance for uncollectible accounts of $36,000 $462,000 During 2021, credit sales were $1,780,000, cash collections from customers $1,860,000, and $41,000 in accounts receivable were written off. In addition, $3,600 was collected from a customer whose account was written off in 2020. An aging of accounts receivable at December 31, 2021, reveals the following: Percentage of Year-End Receivables in Group Percent Age Group 0-60 days 61-90 days 91-120 days over 120 days Uncollectible 70% 58 20 15 5 20 5 40 Required: 1. Prepare summary journal entries to account for the 2021 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: a. Bad debt expense is estimated to be 4% of credit sales for the year. b. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. c. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

Answer 1

Required 1

Event	Journal Entries	Debit	Credit
1	Bad Debts a/c                                      Dr	41,000
	To Accounts Receviable a/c		41,000
	( Being bad debts written off in 2021)
2	Accounts Receivable a/c                    Dr	3,600
	To		3,600
	( Being bad debts reinstate accounts receivable previously written off
3	Cash A/c                                               Dr	3,600
	To Accounts Receivable a/c		3,600
	( Being bad debts previously written off , now recovered)

	Required 2
Event	Journal Entries	Debit	Credit
1	Bads Debts A/c                                         Dr	71,200
	To Accounts Receivable A/c		71,200
	[Being bad debts accounted for 4% of Sales)
2	Bad debts Expenses A/c                            Dr	34,100
	To Allowance for Doubtful Accounts a/c		34,100
	( Being uncollected amount estimated at closing accounts receivable of Rs.3,41,000)
3	Bad debts Expenses A/c                            Dr	1,705
	To Allowance for Doubtful Accounts a/c		1,705
	( Being bad debts account adjusted for allowances account of Rs.34,100-32,395)

Required 3

Event	Net Account Receivable recorded
a	3,10,800 (3,41,000+41,000-71,200)
b	3,47,900 (3,41,000+41,000-34,100)
c	3,39,295   (3,41,000- 1,705)

Answer 2

Where did you get the 32395 from?