Allowance Method for Accounting for Bad Debts

At the beginning of 2017, Miyazaki Company's Accounts Receivable balance was $105,000, and the balance in Allowance for Doubtful Accounts was $1,950. Miyazaki's sales in 2017 were $787,500, 80% of which were on credit. Collections on account during the year were $502,500. The company wrote off $3,000 of uncollectible accounts during the year.

1A. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" on the left side and leave the amount box blank on the right side. If a financial statement item is affected, put the $ amount on the right side. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

_Cash_____

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1B. Identify and analyze the transactions related to the collections of cash during 2017.

Activity ____ (i.e. Operating, financing, or investing)

Accounts ____ (i.e. Cash ___ (increase or decrease); Accounts receivable ___ (increase or decrease))

Statement(s) _____ (Balance sheet only, balance sheet & income statement, or income statement only)

*use same format for following questions like this*^^

1C. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

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1D. Identify and analyze the transactions related to the write-offs of accounts receivable during 2017.

Activity ____

Accounts ____

Statement(s)____

1E. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. If a contra account is decreased, it will have the effect of increasing the corresponding financial statement item.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

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2A. Identify and analyze the adjustments to recognize bad debts assuming that (a) bad debts expense is 3% of credit sales and (b) amounts expected to be uncollectible are 6% of the year-end accounts receivable.

Identify and analyze the adjustments to recognize bad debts assuming that bad debts expense is 3% of credit sales.

Activity ____

Accounts ____

Statement(s)_____

2B. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. If a contra account is decreased, it will have the effect of increasing the corresponding financial statement item.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

________

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2C. Identify and analyze the adjustments to recognize bad debts assuming that amounts expected to be uncollectible are 6% of the year-end accounts receivable.

Activity ____

Accounts___

Statement(s)____

2D. How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign. Remember: if a contra account is increased, it will have the effect of decreasing the corresponding financial statement item. If a contra account is decreased, it will have the effect of increasing the corresponding financial statement item.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

________

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2E. What is the net realizable value of accounts receivable on December 31, 2017, under each assumption in part (2)?

2F. Using the percentage of sales approach, the net realizable value of the receivables is?

2G. Using the percentage of year-end receivables approach, the net realizable value of the receivables is?