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Financial & Managerial Accounting
Found in: Page 343
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Warner Company’s year-end unadjusted trial balance shows accounts receivable of $99,000, allowance for doubtful accounts of $600 (credit), and sales of $280,000. Uncollectibles are estimated to be 1.5% of accounts receivable.

  1. Prepare the December 31 year-end adjusting entry for uncollectibles.

Allowance for doubtful accounts is the type of provision an organization makes for those accounts for whom an organization doubts non-repayment of the due amount from its debtors.

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Step by Step Solution

Introduction

The adjusting entry at the end of the Warner Company’s financial year will be recorded by considering the amount of sales and the amount of uncollectible of the firm.

Journal entry

Date

Particulars

Debit

Credit

December 31

Bad debt expense

$3,600

Allowance for doubtful accounts

$3,600

(To record the bad debt expense)

Most popular questions for Business-studies Textbooks

The following selected transactions are from Springer Company.

2016

Nov. 1 Accepted a $4,800, 90-day, 8% note dated this day in granting Steve Julian a time extension on his past-due account receivable.

Dec. 31 Made an adjusting entry to record the accrued interest on the Julian note.

2017

Jan. 30 Received Julian’s payment for principal and interest on the note dated November 1.

Feb. 28 Accepted a $12,600, 30-day, 8% note dated this day in granting a time extension on the pastdue account receivable from King Co.

Mar. 1 Accepted a $6,200, 60-day, 12% note dated this day in granting Myron Shelley a time extension on his past-due account receivable.

30 The King Co. dishonored its note when presented for payment.

Apr. 30 Received payment of principal plus interest from M. Shelley for the March 1 note.

June 15 Accepted a $2,000, 72-day, 8% note dated this day in granting a time extension on the past-due account receivable of Ryder Solon.

21 Accepted a $9,500, 90-day, 8% note dated this day in granting J. Felton a time extension on his past-due account receivable.

Aug. 26 Received payment of principal plus interest from R. Solon for the note of June 15.

Sep. 19 Received payment of principal plus interest from J. Felton for the June 21 note.

Nov. 30 Wrote off King’s account against Allowance for Doubtful Accounts. Required.

  1. Prepare journal entries to record these transactions and events. (Round amounts to the nearest dollar.)

Analysis Component

  1. What reporting is necessary when a business pledges receivables as security for a loan and the loan is still outstanding at the end of the period? Explain the reason for this requirement and the accounting principle being satisfied.
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