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Answer to Question BD Test No 2(a): To record monthly bad debt expenses accrual summary.
Debit: Bad debt expense (2% x $4,200,000) $84,000 Credit: Allowance for uncollectible accounts $84,000 To record year 2005 accounts receivable write offs.
Debit : Allowance for uncollectible accounts $90,000 Credit: Accounts receivable $90,000 Answer to Question BD No 2(b): Debit: Bad debt expense $22,600 Credit: Allowance for uncollectible accounts $22,600
Ageing $Estimated Allowance 0 – 60 days $1,512,000 x 5% = $75,600 61 – 90 days $220,000 x 10% = $22,000 91- 120 days $50,000 x 30% = $15,000 > 120 days $128,000 x 50% = $64,000 Total $1,910,000 $176,600
Computation of Increase/decrease in Allowance for uncollectible account: Allowance for uncollectible account: Opening Balance $160,000 + Monthly bad debts accruals $84,000 – Write offs ($90,000) Balance before year end adjustment $154,000 Required Allowance ( per above) $176,600 Increase in Allowance $22,600 Answer to Question BD No 2 ©:
Computation of total Bad debt expense for 2005 Monthly accruals $84,000 Year end adjustment 22,600 Total $106,600
Balance Sheet As At Dec 31 st 2005 Current assets: Accounts receivable, net of $176,600 in Allowance for uncollectible accounts $1,733,400 |
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