Collecting a Written-Off Account a. What is the first journal entry made when a customer

Using the Direct Write-Off Method The Parker Supply Company uses the direct write-off method of accounting for uncollectible accounts. Instructions In your working papers: 1. Record the following transactions on page 21 of the general journal. 2. Post the transactions to the appropriate accounts.

Writing Off Accounts Using the Allowance Method Taylor Furniture Company Inc. uses the allowance method to account for uncollectible accounts. Instructions In your working papers: 1. Record the following transactions in the general journal on page 24. 2. Post the transactions to the appropriate accounts. 3. Prepare the Assets section of the balance sheet for Taylor Furniture Company Inc. using the partial general ledger in your working papers. The balance of other asset accounts are Merchandise Inventory, $42,000; Supplies, $1,500; and Prepaid Insurance, $1,200.

Estimating Uncollectible Accounts Expense Using the Percentage of Net Sales Method Following are the end-of-period account balances for several stationery and office supply companies. Each company uses the percentage of net sales method to estimate its uncollectible accounts expense. The percentage used by each company is also listed. Instructions Using the form provided in your working papers: 1. Calculate the amount of the adjustment for uncollectible accounts expense using the percentage of net sales method. 2. Record the adjusting entry for the estimated uncollectible accounts expense for Davis Inc.

Accounting for Uncollectible Accounts a. Explain the difference between the direct write-off method and the allowance method. b. Which method is likely to be used by a business with many charge customers? Which is likely to be used by a business that sells mainly on a cash basis?

Determining Uncollectible Accounts Receivable a. How does the direct write-off method identify the uncollectible accounts expense amount? b. What factors does the allowance method consider in determining bad debt expense?

Direct Write-Off Method a. Which accounting principle does the direct write-off method violate? b. In the direct write-off method of recording an uncollectible account receivable, which accounts are debited and credited?

Bad Debts Expense a. What is another term for bad debts expense? b. What can businesses do to prevent bad debts?

Adjusting Entry a. What accounts are debited and credited in the adjusting entry to record uncollectible accounts using the allowance method? b. What is the account classification of Allowance for Uncollectible Accounts?

Allowance Method a. When does the allowance method recognize the bad debt expense for a year’s sales? b. When a specific account receivable is written off using the allowance method, which accounts are debited and credited?

Collecting a Written-Off Account a. What is the first journal entry made when a customer pays an amount that was previously written off? Name the accounts debited and credited for both methods. b. In the second journal entry, which accounts are debited and credited?

Estimating Uncollectible Accounts Expense a. Describe the percentage of net sales method. b. Describe the aging of accounts receivable method.

Using the Direct Write-Off Method Sunset Surfwear uses the direct write-off method of accounting for uncollectible accounts. Instructions 1. In your working papers, record the following transactions on page 14 in the general journal. 2. Post the transactions to the appropriate accounts. Analyze Describe the impact on Accounts Receivable and Uncollectible Accounts Expense when an account is written off.

Calculating and Recording Estimated Uncollectible Accounts Expense InBeat CD Shop uses the percentage of net sales method of accounting for uncollectible accounts. At the end of the period, the following account balances appeared on InBeat’s trial balance: Instructions 1. In your working papers, calculate the amount of the adjustment for uncollectible accounts for the period ended June 30. Management estimates that uncollectible accounts will be 1 percent of net sales. 2. Journalize the adjusting entry on page 8 in the general journal. 3. Post the adjusting entry to the general ledger accounts. Analyze Determine the book value of accounts receivable.

Writing Off Accounts Under the Allowance Method Shutterbug Cameras uses the allowance method of accounting for uncollectible accounts. Instructions 1. In your working papers, record the following transactions on page 9 in the general journal. 2. Post the transactions to the appropriate accounts. 3. Prepare the Assets section of the balance sheet for Shutterbug Cameras using the partial general ledger in the working papers. The balances of other asset accounts are Merchandise Inventory, $33,000; Supplies, $2,000; and Prepaid Insurance, $1,200. Analyze Calculate the book value of the accounts receivable after the closing entries have been posted.

Estimating Uncollectible Accounts Expense Cycle Tech Bicycles uses the allowance method of accounting for uncollectible accounts. The company estimates the uncollectible amount by aging its accounts receivable accounts. Instructions 1. Complete the analysis of accounts receivable that is included in your working papers. 2. Calculate the estimated uncollectible amount. Use the form provided in your working papers. 3. Journalize the June 30 adjusting entry for uncollectible accounts expense on page 11 of the general journal. Before the adjusting entry, Allowance for Uncollectible Accounts had a credit balance of $142. 4. Post the adjusting entry to the general ledger accounts. Analyze Calculate the book value of accounts receivable.

Reporting Uncollectible Amounts on the Financial Statements The work sheet for River’s Edge Canoe & Kayak is included in your working papers. The trial balance is complete, and all of the adjustments except the one required for uncollectible accounts have been entered. Instructions 1. Record the adjustment for uncollectible accounts expense in the Adjustments section of the work sheet. Uncollectible accounts are estimated to be 1.5 percent of net sales. Label the adjustment (a). 2. Complete the work sheet. 3. Prepare an income statement, a statement of retained earnings, and a balance sheet. 4. Record the adjusting entries on page 18 of the general journal. 5. Post the adjusting entries. Record and post the closing entries. Analyze Compute the balance of Allowance for Uncollectible Accounts before and after the adjusting entry.

Using the Allowance Method for Write-Offs Buzz Newsstand uses the allowance method for uncollectible accounts. Instructions In your working papers, journalize the following transactions on page 13 in the general journal. Post the transactions to the account of Lee Adkins. Analyze Conclude which account you would debit when writing off an account using the direct write-off method instead of the allowance method.