KIMMEL_Acct_2e_ProblemCSolutions_ch08

Accounting: Tools for Business Decision Making

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SOLUTIONS TO PROBLEMS PROBLEM 8-1C (a) Total estimated bad debts Number of Days Outstanding Total 0–30 31–60 61–90 91–120 Over 120 Accounts receivable $435,000 $238,000 $120,000 $44,000 $13,000 $20,000 % uncollectible 1.5% 3% 8% 10% 15% Estimated uncollectible accounts $14,990 $3,570 $3,600 $3,520 $1,300 $3,000 (b) Bad Debts Expense. ......................................... 20,390 Allowance for Doubtful Accounts. .......... 20,390 ($14,990 + $5,400) (c) Allowance for Doubtful Accounts. ................. 7,500 Accounts Receivable. ............................... 7,500 (d) Accounts Receivable. ...................................... 2,000 Allowance for Doubtful Accounts. .......... 2,000 Cash. .................................................................. 2,000 Accounts Receivable. ............................... 2,000 (e) If Happy Daze used 4% of total accounts receivable rather than aging the individual accounts the bad debt expense adjustment would be $22,800 [($435,000 X 4%) + $5,400]. Aging the individual accounts rather than applying a percentage to the total accounts receivable should produce a more accurate allowance account and bad debts expense. 8-1
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PROBLEM 8-2C (a) 1. Accounts Receivable. ...................................... 940,000 Sales. .......................................................... 940,000 2. Sales Returns and Allowances. ...................... 24,000 Accounts Receivable. ............................... 24,000 3. Cash. ................................................................. 880,000 Accounts Receivable. ............................... 880,000 4. Allowance for Doubtful Accounts. ................. 8,000 Accounts Receivable. ............................... 8,000 5. Accounts Receivable. ...................................... 2,000 Allowance for Doubtful Accounts. .......... 2,000 Cash. ................................................................. 2,000 Accounts Receivable. ............................... 2,000 (b) Accounts Receivable Allowance for Doubtful Accounts Bal. 96,000 (2) 24,000 (4) 8,000 Bal. 7,000 (1) 940,000 (3) 880,000 (5) 2,000 (5) 2,000 (4) 8,000 (5) 2,000 Bal. 124,000 Bal. 1,000 (c) Balance needed. ....................................................... $9,200
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KIMMEL_Acct_2e_ProblemCSolutions_ch08 - SOLUTIONS TO...

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