Scoring 3 points per blank Perfect Score 9 Determine the fol

Scoring: 3 points per blank Perfect Score: 9 Determine the following amounts: Peterson Luggage uses the balance sheet approach for recording estimated uncollectibles. Allowance for Doubthul Accounts has a credit balance of $700 on January 1, 20XX. During 20xx, $400 of accounts were written off and $150 of accounts were reinstated. An aging schedule prepared on December 31, 20xx, reveals an estimated $1,700 of uncollectibles. What is the amount of the adjusting entry? 700 30 2 50 450 700 b. Weston Electro nics uses the income statement approach for recording estimated uncollectibles. Allowance for Doubtful Accounts has a credit halance of $600 on January I, 20xx. During 20xX, s300 of the year were $92,500, 2% of this amount is estimated to be uncollectible what is the amount of the adjusting entry prepared on December 31, 20xx? accounts were written off and $250 of accounts were reinstated. Credit sales for c. Frank\'s Furniture uses the income statement approach for recording estimated uncollectibles. Allowance for Doubtful Accounts has a credit balance of $500 on January 1, 20Xx. During 20xx, $700 of accounts were written off and $350 of accounts were reinstated. Credit sales for S86, 700, 4% of this amount is estinated to be uncollectible, what is the ending the year were balance of Allowance for Doubtful Accounts on December 31, 20xX?

Solution

a.  Amount of adjusting entry as at December 30, 20XX $1,250

Working:

Beginning balance of allowance account $700

Written off during the year -$400

Reinstated receivables $150

Balance available $450

Estimated uncollectibales at the year end $1,700

Amount of adjusting entry ($1,700 - $450) $1,250

b. Amount of adjusting entry as at December 30, 20XX = $1,850.

When the income statement approcah is used for estimating the uncollectibles, the balance available in the the allowance account does not have any role. The calculation is based solely on the amount of credit sales and the expected percentage of uncollectible amounts to be applied on the sales figure. The amount arrived at is added to the available balance in the account.

Therefore balance in the allowance account will be calucalted as follows

Beginning balance $600

Amount written off during the year -$300

Amount reinstated during the year $250

Balance avaliable at the year end $50

New provision to be made (2% of 92,500) $1,850

New balance as at December31, 20XX $1,900

c.  

Balance of allowance account as at December 30, 20XX = $3,618.

When the income statement approcah is used for estimating the uncollectibles, the balance available in the the allowance account does not have any role. The calculation is based solely on the amount of credit sales and the expected percentage of uncollectible amounts to be applied on the sales figure. The amount arrived at is added to the available balance in the account.

Therefore balance in the allowance account will be calucalted as follows

Beginning balance $500

Amount written off during the year -$700

Amount reinstated during the year $350

Balance avaliable at the year end $150

New provision to be made (4% of 86,700) $3,468

New balance as at December31, 20XX $3,618