Question

At December 31, 2013, Oettinger Corporation, a premium kitchen cabinetmaker for the home remodeling industry, reported the following accounts receivable information on its year-end balance sheet:
Gross accounts receivable $850,000
Less: Allowance for uncollectibles (25,000)
Accounts receivable (net) $825,000
During 2014, the company had credit sales of $8,200,000 of which it collected $7,975,000. Oettinger employs the sales revenue approach to estimate its bad debt provisions and, continuing to use the same 1% used in previous years, made the normal adjustment at the end of 2014.
Although 2014 started off well, the industry experienced a slowdown in the last four months of the year, and cash collections consequently dropped off substantially. Moreover, a major customer, which owed Oettinger $85,000, unexpectedly filed for bankruptcy and went out of business during November, at which time its account was written off. Oettinger’s controller is concerned that some customers are experiencing cash flow problems and that the company’s allowance for uncollectible accounts is too low. As a result, she prepared the following schedule:


Required:
1. Determine Oettinger’s accounts receivable balance at December 31, 2014. Prepare a journal entry for each transaction affecting the accounts receivable balance for 2014.
2. Prepare an aging analysis to compute the required balance in the Allowance for uncollectible accounts at December 31, 2014.
3. Prepare any other required journal entries affecting the Allowance for uncollectible accounts for the year ended December 31, 2014. (Do not duplicate any entries from requirement 1.)
4. Show Oettinger’s balance sheet presentation of accounts receivable at December 31,2014.


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  • CreatedSeptember 10, 2014
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