[Benay Boyd]

PR 9-1A Entries for receipt and dishonor of note receivable
The following transactions were completed by Axiom Management Company during the current
year ended December 31:

Feb. 17 Received 25% of the $30,000 balance owed by Gillespie Co. a bankrupt business, and
wrote fiscal off the remainder as uncollectible.

Apr. 11 Reinstated the account of Colleen Bertram, which had been written off in the preceding
year as uncollectible. Journalize the receipt of $4,250 cash in full payment of
Colleen's account.
July 6. Wrote off the $9,000 balance owed by Covered Wagon Co. which has no assets.

Nov. 20. Reinstated the account of Dugan Co. which had been written off in the preceding year as
uncollectible. Journalized the receipt of $5,900 cash in full payment of the account.

Dec. 31. Wrote off the following as uncollectible (compound entry): Kipp Co. $3,000;
Moore Co. $4,000; Butte Distributors, $8,000; Parker Towers, $6,700.

31 Based on an analysis of the $1,200,000 of accounts receivable, it was estimated
that $60,000 will be uncollectible. Journalized the adjusting entry.

1. Record the January 1 credit balance of $40,000 in a T account for Allowance for Doubtful Accounts.

2. Journaize the transactions. Post each entry that affects the following selected T Accounts
and determine the new balances:
Allowance for Doubtful Accounts
Bad Debt Expense

3. Determine the expected net realizable value of the accounts receivable as of December 31.
4. Assuming that instead of basing the provision for uncollectible accounts on an analysis of
the adjusting entry on December 31 had been based on an estimated expense of 3/4 of 1%
of the net receivables, sales of %7,500,000 for the year, determine the following:
a. Bad debt expense for the year.
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.

[ScottGem]

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