ch.8 drill sheets-act

ch.8 drill sheets-act - Practice Concept: Accounts...

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Practice Concept: Accounts Receivable (Bad Debt Expense and Allowance Accounts) Steps: 1) Record sales on account 2) End of the period, trying to match “uncollectible expense’ to revenue. Need to estimate bad debts. So the entry and accounting impact of the adjusting entry to estimate bad debts will be Accounts Dr Cr A L SE 3) The method to estimate will either be based on sales or based on an analysis of the accounts receivable balance. If the method used is based on sales, the number calculated is ___________________. If the method used is based on the accounts receivable (or aging), the number calculated will be ___________________________. 4) The period ends, bad debt expense is closed into Retained Earnings, however the “allowance for bad debts:” account remains because it is a ___________________ _______________. 5) The time comes when collection efforts have been exhausted and the company decides to “write off” a specific customer accounts receivable account. Remember the provision for the expense was made when we set up the allowance account back in step 2. So the entry and accounting impact of writing off a bad debt account will be Accounts Dr Cr A L SE 6) Just because an account has been written off, does not mean the customer cannot come back and try and settle the account. In order to record a recovery of a written off account, the company first restore the account and then records the cash collected. So the entry and impact of the recovery would be Accounts Dr Cr A L SE 7) Note the impact of net income of a) Adjustment (step 2) _______________________ b) Write off (step 5) _______________________ c) Recovery (step 6) Summary Accounts used: Classification Financial Statement Accounts Receivable _______________ _________________ Allowance for Bad Debts ________________ ___________________ Bad Debt Expense ________________ ___________________ M8-1 Evaluating the Decision to Extend Credit Nutware Productions Inc. generated sales of $30,000 and gross profit of $10,000 last year. The company estimates that it would have generated sales of $60,000 had it extended credit, but there would be additional costs for associated wages and bad debts totaling $25,000. Should the company extend credit? Acc 2013 Chapter 8 Accounting Lab Practice, 3 rd  edition Page 8.1
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M8-3 Reporting Accounts Receivable and Recording Write-Offs Using the Allowance Method At the end of 2009, Extreme Fitness has adjusted balances of $800,000 in accounts receivable and $55,000 in allowance for doubtful accounts. On January 2, 2010, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $5,000. a.
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This note was uploaded on 01/19/2011 for the course ACC 2013 taught by Professor Noe during the Spring '08 term at Texas San Antonio.

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ch.8 drill sheets-act - Practice Concept: Accounts...

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