4 (LO 2) Writing Ho Publishers, uses the allowance method to estimate uncollectible accounts re- Journalize transactions related to bad ceivable. The...
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P8.4 (LO 2) Writing Ho Publishers, uses the allowance method to estimate uncollectible accounts re-
Journalize transactions related to bad
ceivable. The company produced the following aging of the accounts receivable at year-end (Y in thousands).
debts.
Worksheet
Home Insert Page Layout Formulas
Data Review View
P18
fx
A
B
C
D
E
F
G
Number of Days Outstanding
Total
0-30
31-60
61-90
91-120 Over 120
Accounts receivable 200,000
77,000
46,000
39,000
23,000
15,000
% uncollectible
1%
4%
5%
8%
20%
Estimated bad debts
Instructions
a. Calculate the total estimated bad debts based on the above information.
a. Tot. est. bad debts v9,400
b. Prepare the year-end adjusting journal entry to record the bad debts using the aged uncollectible
accounts receivable determined in (a). Assume the current balance in Allowance for Doubtful
Accounts is a V8,000 debit.
c. Of the above accounts, V5,000 is determined to be specifically uncollectible. Prepare the journal
entry to write off the uncollectible account.
d. The company collects V5,000 subsequently on a specific account that had previously been deter-
mined to be uncollectible in (c). Prepare the journal entry(ies) necessary to restore the account and
record the cash collection.
e. Comment on how your answers to (a)-(d) would change if Ho used 4% of total accounts receivable
rather than aging the accounts receivable. What are the advantages to the company of aging the
accounts receivable rather than applying a percentage to total accounts receivable?
Problem 2 (6 points):
Follow the instructions for P8.4 on page 8-33, but do not ignore GST. Round all
figures to two decimal places. Note the following modifications:
Assume the balances shown in the aging schedule on page 8-33 do not
include GST.
In b., the *8,000 balance does not include GST.
.
In c., the *5,000 of accounts receivable includes GST. The GST portion of
write-offs will be collected in future from the taxation authorities.
In d., the *5,000 cash collected includes GST.
Add the following Instruction:
f .
After you journalise and post the adjusting entry in b., prepare the balance
sheet section that contains accounts receivable. Ignore c. through e. Don't
forget that the *200,000 does not include GST.

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