Estimating and Recording Bad Debt Estimates and WriteOffs; Reporting of Accounts Receivable

At December its annual yearend, the accounts of Sun Systems Inc. show the following.

$ in sales revenue for the year, of which onesixth was on account.

$ credit balance in Allowance for Doubtful Accounts, as of December of the prior year.

$ debit balance in Accounts Receivable as of December of the current year prior to any writeoffs

of uncollectible accounts during the current year

$ in uncollectible accounts to be written off as of December of the current year.

Aging schedule at December of the current year, showing the following breakdown of total accounts receivable

excluding amounts to be written off.

Status Amount

Not past due Remainder

Past due days $

Past due over days

Required

a Prepare the entry to write off the uncollectible accounts.

b Prepare the adjusting entry on December to record bad debt expense for each of the following separate assumptions concerning expected bad debt loss rates. Note: Treat each situation separately.

Bad debt expense is based on of credit sales.

Allowance for doubtful accounts is based on of total receivables at yearend.

Allowance for doubtful accounts is based on the following aging schedule: Not past due, ; Past

due days, ; and Past due over days,

Bad debt expense is based on the direct writeoff method assume entry in part a has not been recorded

c Prepare the balance sheet disclosure showing accounts receivable less the allowance for doubtful accounts for each assumption through of part b For assumption only, assume there is a zero balance in the allowance for doubtful accounts on December of the prior year.

d For reporting purposes in looking at part b what is one limitation when using assumption and when using assumption

Note: Do not use negative signs with any of your answers.