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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 2017 balance sheet disclosed the following:
Current assets: Receivables, net of allowance for uncollectible accounts of $31,000$437,000
During 2018, credit sales were $1,755,000, cash collections from customers $1,835,000, and $36,000 in accounts receivable were written off. In addition, $3,100 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:
Percentage of Year-EndPercentAge GroupReceivables in GroupUncollectible0-60 days60%3%61-90 days10 5 91-120 days20 30 Over 120 days10 45 Required:1. Prepare summary journal entries to account for the 2018 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:
- Bad debt expense is estimated to be 2% of credit sales for the year.
- Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
- Bad debt expense is estimated by computing net realizable value of the receivables. 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 2018 balance sheet?Get business and finance assignment homework help today
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