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 $30,000 $432,000 During 2021, credit sales were $1,750,000, cash collections from customers $1,830,000, and $35,000 in accounts receivable were written off. In addition, $3,000 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 65% Percent Uncollectible 4% Age Group 0-60 days 61-90 days 91-120 days Over 120 days 10 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 3% 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. 3. For situations (a)-(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet? Answer is not complete. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Prepare the year-end adjusting entry for bad debts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) No Transaction General Journal Debit Credit

Answer 1

1)	Journal entries
	Accouting titles & Explanations				Debit	Credit
	Allowance for uncollectible accounts				35,000
	Account receivable					35,000
	Account receivbale				3,000
	allowance for uncollectible accouts					3,000
	Cash				3,000
	Account receivable					3,000
2)	Journal entries
	Accouting titles & Explanations				Debit	Credit
a)	Bad debts expense				52500
	Allowance for uncollectible accounts					52,500
	(1,750,000*3%)
b)	Bad debts expense				36,700
	Allowance for uncollectible accounts					36,700
	(347000*10%+2000)
	T-account
	Account receivable					Allowance for uncollectible
	openint	462000	Cash	1,830,000		written off	35,000	opening	30,000
	Sales	1,750,000	writtehn off	35,000				reinstated	3,000
	restated	3,000	collected	3,000
						bal	2,000
	End bal	347,000
c)	Bad debts expense				37,047
	Allowance for uncollectible accounts					37,047
	(35047+2000)
	Age grouo			%
	0--60		225550	4%	9022
	61--90		69400	15%	10410
	91----120		34700	25%	8675
	over 120		17350	40%	6940
					35047
3)			net account
			receivable reported
	a		296,500
	b		312,300
	c		311,953