QUESTION 6 Use the following information to answer the next

QUESTION 6 Use the following information to answer the next 5 questions: On December 31,2017 a company\'s Accounts Receivable balance was $440,000. During the year the company recorded credit sales of $770,000 and cash collections of $820,000. In addition, the company wrote off S16,000 of accounts as uncollectible and reinstated an accounts receivable that was previously written off that totaled $3,000. The company uses the allowance method to account for its receivables. Determine the balance in the accounts receivable account on January 1, 2017 OA. S406,000 B. $471,000 S506,000 D.$503,000 $374,000 O E. QUESTION 7 Assume the beginning balance on January 1, 2017 in the Allowance for Doubtful Accounts is $15,000 If an aging schedule shows S30,000 to be uncollectible, then the adjusting entry on December 31, 2017 to record bad debts for the period would include a credit to Accounts Receivable for $16,000 B. a credit to Allowance for Doubtful Accounts for S38,000 a debit to Bad Debt Expense for S2,000 a debit to Bad Debt Expense for S15,000 a credit to Allowance for Doubtful Accounts for S2 8,000

Solution

Solution:

Problem 5 – the marked is correct

Problem 6 ----

We need to prepare the T-Account of Accounts Receivable to find out this balance:

Accounts Receivable

Beginning Balance on Jan 1, 2017 (Bal. Fig.)

$503,000

Cash (Collection)

$820,000

Credit Sales

$770,000

Allowance for Doubtful Account (wrote off)

$16,000

Allowance for Doubtful Account (Reinstated previously written off balance)

$3,000

Ending balance

$440,000

$1,276,000

$1,276,000

Hence, the Balance of Accounts Receivable on January 1, 2017 = $503,000

The correct option is D. $503,000

Problem 7 --

Allowance for Doubtful Account Method

Under Allowance for Doubtful Debt method, the company uses an estimate for allowance for doubtful debt by using specified method and accordingly book Bad Debt Expenses for the period.

Allowance method creates bad debts expenses before the company knows specifically which customers will not pay on the basis of prior history and prior experience.

Allowance for Doubtful Account is adjusted to $30,000 to be uncollectible.

We need to prepare the T-Account for this account

Allowance for Doubtful Account

Wrote off during the year

$16,000

Beginning Balance

$15,000

Reinstated AR

$3,000

Bad Debt Expense (Bal. Fig)

$28,000

Ending Balance

$30,000

$46,000

$46,000

Bad Debt Expenses is the balancing figure in T-Account (refer above) = $28,000

To record Bad Debt Expense, the company will record following adjustment entry

Debit Bad Debt Expense $28,000

Credit Allowance for Doubtful Account $28,000

Hence, the correct option is E. a credit to Allowance for Doubtful Accounts for $28,000

Problem 8 ---

Estimated Uncollectible Amount = 2.5% of Credit Sales $770,000 = $19,250

The estimated uncollectible amount to be adjusted to the amount $19,250, so we need to prepare the Accounts Receivable and Allowance for Doubtful Account T-Account to find out this balances.

Net Realizable Value of Accounts Receivable = Accounts Receivable Balance Dec 31, 2017 – Allowance for Doubtful Account balance Dec 31, 2017

= $440,000 – 19,250

= $420,750

Hence, the correct option is C. $420,750

Problem 10 --- I am unable to relate this question with the data provided. Please provide more clarity.

Hope the above calculations, working and explanations are clear to you and help you in understanding the concept of question.... please rate my answer...in case any doubt, post a comment and I will try to resolve the doubt ASAP…thank you

Accounts Receivable
Beginning Balance on Jan 1, 2017 (Bal. Fig.)	$503,000	Cash (Collection)	$820,000
Credit Sales	$770,000	Allowance for Doubtful Account (wrote off)	$16,000
Allowance for Doubtful Account (Reinstated previously written off balance)	$3,000
		Ending balance	$440,000
	$1,276,000		$1,276,000