On December 31, 2005, Jewell Company's Allowance for Doubtful Accounts had an unadjusted credit balance of...

 

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On December 31, 2005, Jewell Company's Allowance for Doubtful Accounts had an unadjusted credit balance of $13,400. The accountant for Jewell has prepared a schedule of the December 31, 2005, accounts receivable by age and, on the basis of past experience, has estimated the percentage of the receivable in each age category that will become uncollectible. This information is summarized as follows: Dec 31/05 Accounts Receivable $730,000 Age of Accounts Receivable Not due (under 30 days) Expected Percentage Uncollectible 1.25% 354,000 76,000 1 to 30 days past due 31 to 60 days past due 2.00% 6.50% 48,000 61 to 90 days past due 32.75% 12,000 Over 90 days past due 68.00% Required: 1. Calculate the amount that should appear in the December 31, 2005, balance sheet as the allowance for doubtful accounts. 2. Prepare the journal entry to record bad debt expense for 2005. 3. On June 30, 2006 Jewell Company concluded that a customer's $3,750 receivable (created in 2005) was uncollectible and that the account should be written off. What effect will this action have on Jewell's 2006 net income? Explain your answer. On December 31, 2005, Jewell Company's Allowance for Doubtful Accounts had an unadjusted credit balance of $13,400. The accountant for Jewell has prepared a schedule of the December 31, 2005, accounts receivable by age and, on the basis of past experience, has estimated the percentage of the receivable in each age category that will become uncollectible. This information is summarized as follows: Dec 31/05 Accounts Receivable $730,000 Age of Accounts Receivable Not due (under 30 days) Expected Percentage Uncollectible 1.25% 354,000 76,000 1 to 30 days past due 31 to 60 days past due 2.00% 6.50% 48,000 61 to 90 days past due 32.75% 12,000 Over 90 days past due 68.00% Required: 1. Calculate the amount that should appear in the December 31, 2005, balance sheet as the allowance for doubtful accounts. 2. Prepare the journal entry to record bad debt expense for 2005. 3. On June 30, 2006 Jewell Company concluded that a customer's $3,750 receivable (created in 2005) was uncollectible and that the account should be written off. What effect will this action have on Jewell's 2006 net income? Explain your answer.

Answer rating: 100% (QA)

1 To calculate the amount that should appear in the December 31 2005 balance sheet as the allowance ... View the full answer