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Take Home Quiz #5 - due in class. Due Tuesday, November 8 This is an individual-take home Quiz #5 worth 25 points. You may use your textbook and...
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Take Home Quiz #5 – due in class. Due Tuesday, November 8 This is an individual-take home Quiz #5 worth 25 points. You may use your textbook and visit with the TA’s. However, you are NOT to work with any person on this Take Home Quiz #5. Yes, we trust you will do the right thing . This quiz is a great review for the final exam if you work on this by yourself. If you cheat just to get the 25 points you will miss the significant points on the final exam. Please do this quiz by yourself and do not share your answers with your classmates. Chapter 7 questions Problem 1 The following information was abstracted from the 2017 financial statements of Jennings Company: Sales $747,000 * Accounts Receivable, December 31, 2017 128,000 Allowance for Doubtful Accounts 1,220 (credit balance) Sales discounts 18,000 * Sales returns 12,400 * *30% related to credit sales Prepare the adjusting entry for doubtful accounts expense under each of the following assumptions: (a) 3 percent of current accounts receivable are uncollectible. (b) 2.5 percent of net credit sales are uncollectible. 1
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Problem 2 From inception of operations to December 31, 2017, Harris Corporation provided for uncollectible accounts receivable under the allowance method. Provisions were made monthly at 2 percent of credit sales; bad debts written off were charged to the allowance account; recoveries of bad debts previously written off were credited to the allowance account; and no year-end adjustments to the allowance account were made. Harris's usual credit terms are net 30 days. The credit balance in the allowance for doubtful accounts was $260,000 at January 1, 2017. During 2017, credit sales totaled $18,000,000, interim provisions for doubtful accounts were made at 2 percent of credit sales, $180,000 of bad debts were written off, and recoveries of accounts previously written off amounted to $30,000. Harris installed a computer system in November 2017 and an aging of accounts receivable was prepared for the first time as of December 31, 2017. A summary of the aging is as follows: Classifications by Balance in Estimated % Month of Sale Each Category Uncollectible November-December 2017 $2,280,000 2% July-October 2017 1,200,000 15% January-June 2017 800,000 25% Prior to January 1, 2017 260,000* 80% *Based on the review of collectability of the account balances in the "Prior to January 1, 2017" aging category, additional receivables totaling $120,000 were written off on December 31, 2017 meaning that of the $260,000 in this aging category, $120,000 was written off on December 31, 2017. The "Prior to January 1, 2017" aging category has an ending balance, after the write offs, of $140,000. Effective with the year ended December 31, 2017, Harris adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable. Required: (a) Prepare a T-account that analyzing the changes in the allowance for doubtful accounts for the year ended December 31, 2017. (b) Prepare the journal entry for the year-end adjustment to the allowance for doubtful accounts balance as of December 31, 2017. (c) What is the estimated net realizable value at December 31, 2017 after all the adjusting entries have been made? 2
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Subject: Accounting, Business

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