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Intermediate Accounting (Kieso)
Found in: Page 371

Short Answer

The following are a series of unrelated situations. 1. Halen Company’s unadjusted trial balance at December 31, 2017, included the following accounts.

Debit $

Credit $

Accounts receivables

$53,000

Allowance for doubtful accounts

4,000

Net sales

$1,200,000

Halen Company estimates its bad debt expense to be 7% of gross accounts receivable. Determine its bad debt expense for 2017.

2. An analysis and aging of Stuart Corp. accounts receivable at December 31, 2017, disclosed the following.

Amounts estimated to be uncollectible

$180,000

Accounts receivables

1,750,000

Allowance for doubtful accounts (per books)

125,000

What is the net realizable value of Stuart’s receivables at December 31, 2017?

3. Shore Co. provides for doubtful accounts based on 4% of gross accounts receivable, The following data are available for 2017.

Credit sales during 2017

$4,400,000

Bad debt expenses

57,000

Allowance for doubtful accounts 1/1/17

17,000

Collection of accounts written off in prior years (Customer credit was re-established)

8,000

Customer accounts written off as uncollectible during 2017

30,000

What is the balance in Allowance for Doubtful Accounts at December 31, 2017?

4. At the end of its first year of operations, December 31, 2017, Darden Inc. reported the following information.

Accounts receivable, net of allowance for doubtful accounts

$950,000

Customer accounts written off as uncollectible during 2017

24,000

Bad debt expense for 2017

84,000

What should be the balance in accounts receivable at December 31, 2017, before subtracting the allowance for doubtful accounts?

5. The following accounts were taken from Bullock Inc.’s trial balance at December 31, 2017.

Debit

Credit

Net credit sales

$750,000

Allowance for doubtful accounts

$14,000

Accounts receivables

310,000

If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported for 2017.

Instructions

Answer the questions relating to each of the five independent situations as requested.

1

Total bad debt expenses

$7,710

2

Net realizable value

$1,570,000

3

Allowance for doubtful accounts

$171,000

4

Gross accounts receivables

$1,010,000

5

Bad debt expenses after adjustments

$23,300

See the step by step solution

Step by Step Solution

Definition of Bad Debt Expenses

Bad debt expenses can be defined as sacrifices that arise from the un-collectability of payments due from receivables.

Bad debt expenses

Particular

Amount $

Allowance for doubtful accounts

$4,000

Add: 7% of gross receivables

3,710

Total bad debt expenses

$7,710

Net realizable value

Particular

Amount $

Accounts receivables

$1,750,000

Less: Estimated uncollectible amount

(180,000)

Net realizable value

$1,570,000

Balance in allowance for doubtful accounts

Particular

Amount $

Opening balance

$17,000

Add: Re-established credit

8,000

Less: Customer accounts are written off as uncollectible

(30,000)

Add: Bad debt expenses @ 4% of $4,400,000

176,000

Allowance for doubtful accounts

$171,000

Balance in Accounts receivables

Particular

Amount $

Bad debt expenses 2017

$84,000

Less: Uncollectible 2017

(24,000)

$60,000

Add: Net accounts receivables

950,000

Gross accounts receivables

$1,010,000

Bad debt expenses for the year 2017

Particular

Amount $

Bad debt expenses before adjustments @ 3% of $310,000

$9,300

Add: Allowance for doubtful accounts (debit balance)

14,000

Bad debt expenses after adjustments

$23,300

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