Cho Sportswear, Ltd. developed an aged schedule of accounts receivable at the end of each year.

The company estimated an allowance for uncollectible accounts based on the following rules:

Aging Category                     Allowance Provided

Current………………………..                        5%

1– 30 Days Past Due………….                      9%

31– 60 Days Past Due………...                       20%

61– 90 Days Past Due………...                      55%*

Over 90 Days Past Due……….                      80%*

* The percentages are applied after a specific review of all accounts in these aging categories.

After a specific review of the company’s accounts receivable, Cho’s credit manager decided to provide a full allowance against all Bauer Brands’ balances that are more than 60 days past due. The percentage allowance is applied to the 61– 90 days and over 90 days past due aging categories only after deducting the balances due from Bauer Brands.

Cho reported net credit sales of $ 45,000,000 for the current year. We present the company’s ending balances of accounts receivable and the allowance for uncollectible accounts below:

Required

a. Compute the balance required in the allowance for uncollectible accounts at year- end.

b. Prepare the journal entry to record the bad debt provision for the current year. 

c. Independent of your answer to part (b), prepare the journal entry to record the bad debt provision for the current year assuming that the allowance for uncollectible accounts had a $ 331,000 debit balance. 

d. Independent of your prior responses, prepare the journal entry to record bad debt provision for the cur-rent year assuming that the company estimates its uncollectible accounts at 3% of net credit sales.

e. In the following year, Cho’s credit management decided to write off all accounts that were over 90 days past due. Prepare the journal entry. 

f. After the write- offs recorded in part (e), assume that Conroy Clothing pays the entire balance due. Prepare the journal entries required to record the subsequent recovery of the Conroy Clothing receivables.

Transcribed Image Text:

Cho Sportswear: Aged Schedule of Accounts Receivable Past Due 1-30 Days 31-60 Days 61-90 Days Over 90 Days Current Totals Customer Ryoko Design Asscciates 100,000 S 23,800 Marcy Fashions, Inc. Conroy Clothing Lee Womensware Bauer Brands, Ltd S 123.800 931.000 $456,000 $789,412 1,245,412 651.200 237588 1.094 430 3.00 $130.570 946.788 S808412 3.189.000 657,000 198,000 S 76,000 237200 10,230 54,570 349,200 100,230 76,770 41.588 19,000 Accounts Receivable Ending Balance 3,189,000 Allowance for Uncollectible Accounts 348,810 Unadjusted Ending Balance