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Chapter 11

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13 views

Chapter 11

Uploaded by

leonardonocaprio616
Copyright
© © All Rights Reserved
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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EXERCISE 1

ACCOUNTS RECEIVABLE 125,000


ALLOWANCE FOR DOUBTFUL ACCOUNTS 2,000
SALES 1,200,000
SALES RETURNS & ALLOWANCES 10,000
SALES DISCOUNT 20,000
NET SALES 1,170,000

A 1. 1% OF GROSS SALES (PROVISION AND EXPENSE) - INCOME STATEMENT APPROACH

Doubtful Accounts Expense 12,000


Allowance for Doubtful Accounts
(1% x 1,200,000)
CR BAL
ALLOWANCE FOR DOUBTFUL ACCOUNTS,BEG 2,000
PROVISION FOR THE YEAR 12,000
ALLOWANCE FOR DOUBTFUL ACCOUNTS, END 14,000

2. 1% OF NET SALES (PROVISION AND EXPENSE) - INCOME STATEMENT APPROACH

Doubtful Accounts Expense 11,700


Allowance for Doubtful Accounts
(1% x 1,170,000)

ALLOWANCE FOR DOUBTFUL ACCOUNTS,BEG 2,000


PROVISION FOR THE YEAR 11,700
ALLOWANCE FOR DOUBTFUL ACCOUNTS, END 13,700

3. INCREASE THE ALLOWANCE BY 1% OF AR (PROVISION AND EXPENSE FOR THE YEAR) - BALANCE SHE

Doubtful Accounts Expense 1,250


Allowance for Doubtful Accounts
(1% x 125,000)

ALLOWANCE FOR DOUBTFUL ACCOUNTS,BEG 2,000


PROVISION FOR THE YEAR 1,250
ALLOWANCE FOR DOUBTFUL ACCOUNTS, END 3,250

4. INCREASE THE ALLOWANCE TO 2% OF AR (REQUIRED ALLOWANCE BALANCE)


Doubtful Accounts Expense 500
Allowance for Doubtful Accounts

ALLOWANCE FOR DOUBTFUL ACCOUNTS,BEG 2,000


PROVISION FOR THE YEAR 500
ALLOWANCE FOR DOUBTFUL ACCOUNTS, END 2,500
(2% X 125,000)

5. BASED AGING SCHEDULE (REQUIRED ALLOWANCE BALANCE)

Doubtful Accounts Expense 250


Allowance for Doubtful Accounts

ALLOWANCE FOR DOUBTFUL ACCOUNTS,BEG 2,000


PROVISION FOR THE YEAR 250
ALLOWANCE FOR DOUBTFUL ACCOUNTS, END 2,250
(AS PER AGING SCHEDULE)
EXERCISE 2

EST %
UNCOLLECTI
AMOUNT AGE OF ACCOUNTS BILITY
60,000 WITHIN THE DISCOUNT PERIOD 0
150,000 1-30 DAYS PAST DUE 2%
70,000 31-60 DAYS PAST DUE 5%
50,000 61-90 DAYS PAST DUE 25%
30,000 OVER 90 DAYS 50%
360,000

Doubtful Accounts Expense 14,000


Allowance for Doubtful Accounts

ALLOWANCE FOR DOUBTFUL ACCOUNTS,BEG 20,000


PROVISION FOR THE YEAR 14,000
ALLOWANCE FOR DOUBTFUL ACCOUNTS, END 34,000

ACCOUNTS RECEIVABLE 360,000


LESS: ALLOWANCE FOR DOUBTFUL ACCOUNTS 34,000
NET REALIZABLE VALUE 326,000
dr B 1 2 3 4
cr Accounts Receivable 125,000 125,000 125,000 125,000
cr Less: Allowance for Bad Debts 14,000 13,700 3,250 2,500
dr Net Realizable Value 111,000 111,300 121,750 122,500
dr

EMENT APPROACH

12,000

DR BAL
- 2,000
12,000
10,000

ENT APPROACH
WRITE-OFF

11,700 ALLOWANCE FOR D/A 5,000


ACCOUNTS RECEIVABLE 5,000

ALLOWANCE FOR D/A


5,000 2,000

3,000
ENSE FOR THE YEAR) - BALANCE SHEET APPROACH

1,250

CE BALANCE)
500

250

Allowance
-
3,000
3,500
12,500
15,000
34,000 required allowance

14,000
5
125,000
2,250
122,750

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