[smaceach]

Baffled by the below homework questions...

6.21. Journal entries for the allowance method. Data related to the sales on account on Health Company for its first three years of operations appear below:

Accounts Written Off as Uncollectible in Year
Year Sales on Account 6 7 8 9 10 Total
6 $340,000 $1,800 $5,800 $3,000 --------- --------- $10,600
7 450,000 ----------- 2,500 8,200 $3,400 --------- 14,100
8 580,000 ----------- ---------- 2,900 12,700 $3,300 17,900
$1,370,000 $1,800 $8,300 $14,100 $16,100 $3,300 $42,600

Heath Company estimates that 3 percent of sales on account will ultimately become uncollectible. Uncollectible accounts generally occur within 3 years of the year of sale.

a. Prepare journal entries to recognize bad debt expense and to write off uncollectible accounts for Year 6, Year 7, and Year 8 using the allowance method.
b. Does 3 percent of sales on account appear to be a reasonable rate for estimating uncollectibles?

6.23 Reconstructing events when using the allowance method. Selected data from the accounts of Logue Corporation before recognizing bad debt expense for the year appear below:

January 1 December 31
Accounts Receivable – Gross $115,900 Dr. $122,700 Dr.
Allowance for Uncollectible Accounts 18,200 Cr. 2,900 Dr.
Retained Earnings (Bad Debt Expense) -------------------------------- --------------------------------
Retained Earnings (Sales) -------------------------------- 450,000 Cr.

Logue Corporation estimates that 6 percent of sales, which are all on account, will become uncollectible. There were no recoveries during the year of accounts written off in previous years.

Give journal entries for the following transactions or events of Logue Corporation that account for the changes in the accounts shown above:
a. Sales on account during the year.
b. Write-off of actual uncollectible accounts during the year.
c. Collection of cash from customers from sales on account during the year.
d. Provision of the year for estimated uncollectible accounts.

6.28 Analyzing changes in accounts receivable. Selected data from the financial statements of American Express appear below (amounts in millions).

Year 4 Year 5 Year 6 Year 7
Balance Sheet
Accounts and Notes Receivable, net of allowance for uncollectible accounts of $1,419 at the end of Year 4, $1,411 at the end of Year 5, $1,559 at the end of Year 6, and $1,728 at the end of Year 7








$41,883








$43,278








$50,049








$56,631
Income Statement
Revenues on account $19,132 $21,278 $23,675
Bad debt expense $2,187 $2,212 $2,439

a. Prepare journal entries for Year 5, Year 6, and Year 7 for the following events:
1. Revenues on account
2. Provision for estimated uncollectibles
3. Write-off of actual uncollectible accounts
4. Collection of cash from customers.

b. Compute the amount of the following ratios:
1. Accounts receivable turnover ratio for Year 5, Year 6, and Year 7
2. Bad debt expense divided by revenues on account for Year 5, Year 6, and Year 7
3. Allowance for uncollectible accounts divided by accounts receivable (gross) at the end of Year 5, Year 6, and Year 7
4. Write-offs of actual uncollectible accounts divided by average accounts receivable (gross) for Year 5, Year 6, and Year 7.
c. What do the ratios computed in part b suggest about the collection experience of American Express during the three-year period?



6.29 Analyzing changes in accounts receivable. The financial statements and notes for May Department Stores reveal the following 4 recent years (amounts in millions):

Year 9 Year 10 Year 11 Year 12
Total Sales $8,330 $9,456 $10,035 $10,615
Credit Sales/Total Sales 62.2% 64.9% 66.9% 68.7%
Bad Debt Expense $57 $64 $82 $96
End of Year
Year 8 Year 9 Year 10 Year 11 Year 12
Accounts Receivable, Gross $1,592 $2,099 $2,223 $2,456 $2,607
Less Allowance for Uncollectible Accounts (47) (61) (66) (84) (99)
Accounts Receivable, Net $1,545 $2,038 $2,157 $2,372 $2,508

A. Compute the amount of accounts written off as uncollectible during Year 9, Year 10, Year 11 and Year 12.
B. Compute the amount of cash collections from credit customers during Year 9, Year 10, Year 11 and Year 12.
C. Calculate the accounts receivable turnover ratio for Year 9, Year 10, Year 11, and Year 12 using total sales in the numerator and average accounts receivable (net) in the denominator.
D. Repeat part C but use credit sales in the numerator.
E. What are the likely reasons for the different trends in the two measures of the accounts receivable turnover ratio in parts c and d?

[ScottGem]

Please see this first:

https://www.askmehelpdesk.com/showthread.php?t=22670

[smaceach]

6.23 Reconstructing events when using the allowance method. Selected data from the accounts of Logue Corporation before recognizing bad debt expense for the year appear below:

Question: do you think that the below calculations are correct? If you have any better solutions/equations to utilize please share. Thanks.

Accounts Receivable Gross: (January 1 Dr) $115,900; (December 31 Dr.) $122,700
Allowance for Uncollectible Accounts: (January 1 Cr) 18,200; (Dec 31 Dr.) $2,900
Retained Earnings (Bad Debt Expense): (January 1) $0; (Dec. 31) $0
Retained Earnings (Sales): (January 1) $0; (Dec. 31 Cr) $450,000

Logue Corporation estimates that 6 percent of sales, which are all on account, will become uncollectible. There were no recoveries during the year of accounts written off in previous years.

Give journal entries for the following transactions or events of Logue Corporation that account for the changes in the accounts shown above:
* Logue Corporation reconstructing events when using the allowances method… Please share any other methods to make these calculations/journal entries…

a. Sales on account during the year.
Account receivable $450,000 (debit)
Sales revenue $450,000 (credit)

b. Write-off of actual uncollectible accounts during the year.
Allowance for uncollectible accounts $21,100 (debit)
Accounts receivable $21,100 (credit)
$21,100 = $18,200 + $2,900

c. Collection of cash from customers from sales on account during the year.
Cash $422,100 (debit)
Accounts receivable $422,100 (credit)
$422,100 = $115,900 + $450,000 - $21,100 - $122,700

d. Provision of the year for estimated uncollectible accounts.
Bad debt expense $27,000 (debit)
Allowance for Uncollectible Accounts $27,000 (credit)
$27,000 = .06 x $450,000