Ask Me Help Desk - Record T account for Allowance of Doubtful Accounts: How do I do this?

Allowance for Doubtful Accounts/Bad Debit
I am almost at my wits end with this one. I am trying to complete an assignment for an accounting class and I am completely stuck. I am hoping that someone can help me out. I would be so grateful if someone can explain how to figure these problems out. I have been working on this for days and I am getting close to my due date. Thanks to anyone who can help!
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The following transactions were completed by Clark Management Company during the current fiscal year ended December 31:

Jul. 5 Received 70% of the $21,000 balance owed by Dockin's Co, a bankrupt business and wrote off the remainder as uncollectible.

Sept. 21 Reinstated the account for Bart Tiffany, which had been written off on the preceding year as uncollectible. Journalized the receipt of $4,875 cash in full payment of Tiffany's account.

Oct. 19 Wrote off the $6, 275 balance owed by Ski Time, which has no assets.

Nov. 6 Reinstated the account of Kirby Co, which had been written off in the preceding year as uncollectible. Journalized the receipt of $4,750 cash in full payment.

Dec. 31 Wrote off the following accounts as uncollectible (compound entry): Maxie co. $2150, Kommers co. $3600, Helena Distributors $5500, Ed Ballantyne $1750.

Dec. 31 Based on an analysis of the $815,240 of the accounts receivable, it was estimated that $16,750 will be uncollectible. Journalized the adjusting entry.

QUESTIONS:

1 and 2.

After posting the January 1 credit balance of $12,550 to Allowance for Doubtful Accounts, Journalize the transactions. In compound entries, post in decreasing dollar amounts.

I have the following done (I can't figure out the part in red):

Date Description Debit Credit

Jul 5 cash 14700
allowance for doubtful accounts 6300
account rec.-Dockins 21000

Sept 21 account rec.-bart tiffany 4875
allowance for doubtful acct 4875

Sept 21 cash 4875
Acct. Rec.-Bart Tiffany 4875

Oct. 19 allowance for doubtful acct. 6275
acct. rec.-ski time co. 6275

Nov. 6 acct rec.-Kirby Co. 4750
allowance for doubtful acct. 4750

Nov. 6 cash 4750
Account rec.-kirby 4750

Dec. 31 Allowance for Doubtful Accts 13000
Accounts Receivable- Maxie 2150
accounts receivable-Kommers 3600
Accounts Receivable- Helena Dis. 5500
accounts receivable-ed Ball. 1750

Dec. 31 Bad Debt Expense??
Allowance for Doubtful Accounts??

How do I calculate these two entries?? I have tried everything!

3. Determine the net expected realizable value of the accounts receivable as of December 31. I got $798,490.

4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of 1/4 of 1% of the net sales of $7,126,000 for the year, determine the following:

a. Uncollectible accounts expense for the year. I got $17,815.

b. Balance in the allowance account after the adjustment of December 31.?

c. Expected net realizable value of the accounts receivable as of December 31.?

IF SOMEONE CAN EXPLAIN TO ME HOW TO ANSWER THE?? I WOULD BE SOOOO HAPPY!

Quote:

I have the following done (I can't figure out the part in red):

Sorry, nothing was in red.

All of the entries you did do were correct. (Although it would be helpful if you'd put Dr and Cr before every line, because you can't indent properly here.)

Quote:

Dec. 31 Bad Debt Expense??
Allowance for Doubtful Accounts??

How do I calculate these two entries?? I have tried everything!

There are two methods by which to estimate the dollar amount that will be used in the adjusting entry done at year-end. The accounts will remain what you have above, but we have to have a way to estimate what dollar amount will be used.

One of those methods (the harder one) is an analysis of the receivables. This method determines what BALANCE you want to have in your allowance account, not what number you want in the entry. Remember that you can't journalize a balance. So you have to use that info to determine what the number for the entry is.

If for instance, the balance prior to your adjusting entry is 15,000 credit, and the problem says you've estimated that 100,000 will not be collectible, they're saying they want 100,000 as a balance in that account. In order to get that balance, you would have to credit another 85,000. So the number for the entry is the 85,000. Does that make sense? That's what you're being asked to do here.

But you will have to follow the instructions and post all the entries first into either the ledger account or t account. The only account you need to post is the allowance, because you need to know what the balance is prior to doing this entry. (Don't forget the beginning of year balance they gave you.) Then the 16,750 is the balance they want. So you have to figure out what you need to credit in that entry in order to get to 16,750.

Quote:

3. Determine the net expected realizable value of the accounts receivable as of December 31. I got $798,490.

Net realizable value is accounts receivable less the allowance. You never gave a balance for receivables so I can't check this.

Quote:

4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of receivables, the adjusting entry on December 31 had been based on an estimated expense of 1/4 of 1% of the net sales of $7,126,000 for the year, determine the following:

a. Uncollectible accounts expense for the year. I got $17,815.

That's correct. This is the other method used for determining the dollar amount that goes into the entry. This one is easier, because the 17,815 goes directly into the entry and you don't have to try to get to any particular balance.

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b. Balance in the allowance account after the adjustment of December 31.?

Again, you have to post all the entries and get the balance prior to the adjusting entry first. Then post the adjusting entry using the 17,815 from above. You'll need to keep in mind that this is a "start over from scratch." That is, a company can't do both methods. You have to back up to before you did the original 12/31 adjusting entry and pretend that one was never done.

And again, you can't get net realizable value until you get that allowance account balanced. And I can't check it without the receivables balance.

Quote:

Dec. 31 Bad Debt Expense??
Allowance for Doubtful Accounts??

After posting entries to the allowance account, you will get a debit balance of $3,400. Since the question requires a credit balance of $16,750, the adjustment for the bade debts expense will be $20,150.

Quote:

3. Determine the net expected realizable value of the accounts receivable as of December 31. I got $798,490.

You adjusted $16,750 from the balance in the accounts receivable. The correct figure will be $815,240 - 20,150 = 795,090

4B. Since the adjustment of $17,815 will be recorded as a credit in the allowance account, the balance in the allowance account will now be $14,415 and the expected NRV will be $815,240 - 14,415 = $800,825

p.s.
Morgain300: the balance of $815,240 appears as the second of the December 31 transaction.

Quote:

Originally Posted by rehmanvohra

You adjusted $16,750 from the balance in the accounts receivable. The correct figure will be $815,240 - 20,150 = 795,090

OP's answer was correct, given the 815,240. The 20,150 is the entry, not the ending balance.