Admin1120 Question (Accounting)

[Kobe]

Alright, i got this question due tommorow, But I am SOOOOOO lost on it, like I dont know where to start, Its not worth much, but I still need 2 figure out how to do it..

Can someone give me some pointers on how to answer this question

At the beginning of the current period, Hong Co. has balances in Accounts Receivable
of $400,000 and in Allowance for Doubtful Accounts of $22,000 (credit). During
The period, it has net cred sales of $950,000 and collectionf of $1,021,000. It
wrote off accounts receivable of $29,250 as uncollectable. however, $1,750 of one
of the accounts written off as uncollectable was recovered beforew the end of the current
period.

And the questions


A) Prepare the entries to record sales and collections during the period.

B) Prepare the entries to record the write-off of uncollectible accounts and the recovery
of accounts written off as uncollectivle during the period. Determine the unadjected ending
balance in Accounts Receivable and Allowance for Doubtful Accounts.

C) Prepare the entry to record bad debts expense for the period if Hong Co. extimates
6% of total accounts receivable will become uncollectable.

D) Determine the ending balances in A/R and Allowance for Doubtful Accounts.



For A) I think it would go as

A/R 950,000
Sales Revenue 950,000


But I'm so lost, I sure im completely wrong, few more parts to the question, but If i figure this out, Im sure all get the rest..

[BrknFngrs]

easiest way to do questions like this is going to be with t-accounts

then just plug your information from the t accounts into basic entries

[BrknFngrs]

taking a quick glance i would suggest something along the lines of: (sorry format got kind of weird, first line is the debit, second is credit)

a)

a/r 950,000
sales 950,000

cash 1021000
a/r 1021000

b)
write off

allowance for doubtful accounts 29250
a/r 29250

correction for write off

a/r 1750
allowance for doubtbul accounts 1750

c)
these accounts are right, number may vary depending on the method of calculating bad debt expense though, this is based on 6% of closing receivable

bad debt expense 19740
allowance for doubtful accounts 19740

d) use t-accounts for this

[Kobe]

Hey thanks for all the help, However for C, How are you getting 19740 for Bad Debt Expense..

Thanks for all the help :)

[BrknFngrs]

After reading it again you should probably treat the 6% of total receivables as your desired ending balance for your allowance account and then just "plug" the bad expense amount. T-accounts would show 22000Cr - 29250Dr +1750Cr + Bad Debt Expense = 19740, therefore bad debt expense is 14240

bad debt expense 14240
allowance for doubtful accounts 14240

[Si_FlyGuy]

too late

[Kobe]

Thanks Im still not seeing where you are getting the 19,740..

Thankful for all the help, but I still wanna learn how to do it, lol....

[BrknFngrs]

o sorry, forget to explain that (and i a made a slight error, should be a total of 301500, after 6% it gives you 18090), im gettin that by taking the ending balance in the A/R account after all the years events (use t-accounts) and multiplying it by the 6% the company expects to be uncollectable.

open 400,000
added 950,000
collected 1,021,000
wrote off 29,250
added back 1750
total is 301,500
times 6% 18090

now just use the desired 18090 ending balance to workout your expense like i did above, sorry bout the error, havent done this in a while

[Kobe]

OOO ok, I get it...
Thank you very much :D

:goflames: :goflames:

[BrknFngrs]

glad to hear haha, keep in mind the bad debt expense value can change depending on the policy used for calculating it.

Have a good one