Bad debts expense under the allowance method better matches expense with revenue because the expense is recorded in the same period the sales are made. requirement 4balance write-off methodaccounts receivable$ 111,000$ 111,000less: allowance for bad debts(16,900)accounts receivable, net$ 94,100net accounts receivable under the allowance method is more realistic because it shows theamount of the receivables that the company expects to collect. accounts receivable8/31 bal 155,000627,000 collectedrevenue 590,0007,000 wrote off 9/30 bal 111,000bad debts expenseexpense 7,000bal 7,000
p8-28arequirement 1dateaccounts and explanationdebitcredit2014dec. 28allowance for bad debts2,900accounts receivable—regan, co.1,300accounts receivable—owen mac900accounts receivable—rain, inc.700dec. 31bad debts expense10,951allowance for bad debts10,951($11,551 – $600 = $10,951)age of accounts receivable1 – 30 days31 – 60 days61 – 90 daysover 90 daystotal receivablesaccounts receivable$97,000$37,000$14,000$17, 000$165,000percent uncollectible×0.3%×3.0%×30.0%×35.0% estimated total uncollectible$ 291$ 1,110$ 4,200$ 5,950$11,551 (target balance)requirement 2requirement 3mountain terrace medical centerbalance sheet−partialdecember 31, 2014assetscurrent assets: accounts receivable$ 165,000less: allowance for bad debts(11,551)$ 153,449allowance for bad debts3,500 9/30 balwrote off 2,900600 12/28 bal10,951 expense11,551 12/31 bal
p8-29arequirements 1 and 2allowance for bad debts0 bal9,0009,000 12/31/2013 baljun. 29 7008,300 06/29/2014 bal700 aug. 69,000 08/06/2014 baldec. 31 3,0006,000 12/31/2014 bal9,200 dec. 3115,200 12/31/2014 balbad debts expensebal 0dec. 31 9,00012/31/2013 bal 9,0009,000 closing entry01/1/2014 bal 0dec. 31 9,20012/31/2014 bal 9,2009,200 closing entry01/1/2014 bal 0
p8-29arequirements 1 and 2, cont. dateaccounts and explanationdebitcredit2013dec. 31bad debts expense9,000allowance for bad debts9,000(2% × $450,000 = $9,000)dec. 31income summary9,000bad debts expense9,0002014jan. 17accounts receivable—malcom monet700sales revenue700jun. 29allowance for bad debts700accounts receivable—malcom monet700aug. 6accounts receivable—malcom monet700allowance for bad debts 700aug. 6cash700accounts receivable—malcom monet700dec. 31allowance for bad debts3,000accounts receivable—brian kemper1,600accounts receivable—may milford1,000accounts receivable—ronald richter400dec. 31bad debts expense9,200allowance for bad debts9,200(2% × $460,000 = $9,200)dec. 31income summary9,200bad debts expense9,200
p8-29a, cont. requirement 3quality watchesbalance sheet−partialdecember 31, 2014assetscurrent assets: accounts receivable$ 135,000less: allowance for bad debts(15,200)$ 119,800
p8-30adateaccounts and explanationdebitcredit2013jul. 1notes receivable—great mart45,000sales revenue45,000oct. 31cash21,000sales revenue21,000nov. 3credit card expense410cash410dec. 31interest receivable2,700interest revenue2,700($45,000 × 0.12 × 6/12)dec. 31bad debts expense3,600allowance for bad debts3,600($15,200 – $11,600 = $3,600)2014apr. 1cash ($45,000 + $1,350 + $2,700)49,050interest receivable2,700interest revenue ($45,000 × 0.12 × 3/12)1,350notes receivable—great mart45,000jun. 23notes receivable—ambiance, corp.13,000sales revenue13,000aug. 22accounts receivable—ambiance, corp.13,195interest revenue ($13,000 × 0.09 × 60/360)195notes receivable – ambiance, corp.13,000nov. 16notes receivable—creed, inc.21,000cash21,000dec. 5cash13,195accounts receivable—ambiance, corp.13,195dec. 31interest receivable210interest revenue210($21,000 × 0.08 × 45/360)