The information below was taken from Xcell Inc's financial records at July 31, 2015, the company's year
Question:
The information below was taken from Xcell Inc's financial records at July 31, 2015, the company's year end. The information was taken prior to adjusting entries and before any uncollectible accounts have been recorded
Debit | Credit | |
Accounts Receivable | $100,000 | |
Allowances for doubtful accounts | $2,000 | |
Sales (60% on credit) | $800,000 |
As well, there is the aging analysis of accounts receivable, including uncollectible accounts of $700 which are all past due over 90 days.
Status | Amount |
Not past due | $50,000 |
Past due 1-60 days | $25,000 |
Past due 61-90 days | $15,000 |
Past due over 90 days | $10,000 |
Instructions:
Part 1:
a) Determine the journal entry to record uncollectible accounts at year-end.
Part 2:
Determine the adjusting journal entries to record bad debts at year-end based on the following three independent assumptions regarding bad debt percentages:
a) Based on 7% of credit sales.
b) 3% of total receivables net of uncollectible accounts.
c) Based on the aging schedule where:
Amount | Percentage uncollectible | |
Not past due | $50,000 | 1% |
Past due 1-60 days | $25,000 | 5% |
Past due 51-90 days | $15,000 | 20% |
Past due over 90 days | $10,000 | 70% |
Financial and Managerial Accounting the basis for business decisions
ISBN: 978-0078111044
16th edition
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello