CUMULATIVE REVIEW PROBLEM CHAPTER 7 The purpose of this prob

CUMULATIVE REVIEW PROBLEM: CHAPTER 7 The purpose of this problem is to procide an opportunity to reciere both nee concepts in the current chapter and major concepts in previous chapters. This cumulatice reciew should assist you in integrating accounting concepts and preparing for exams. REQUIRED: Use the following information for the five questions which follow. On December 31, 2011, the unadjusted trial balance of Pete Inc., included the following accounts: Credit $900,000 Debit Sales (90% represent credit sales) Accounts Receivable Allowance for Doubtful Accounts $300,000 300

Solution

Solution 1:

Solution 2:

Ending Balance of Allowance for Doubtful Accounts = Ending Accounts Receivable *3% = $300,000*3% = $9,000

Bad debt expense to be recorded on Dec 31,2011 = Ending Balance of Allowance for Doubtful Accounts - Beginning Balance Allowance for Doubtful Accounts

= $9000 - $300 = $8,700

Solution 3:

Net Realizable value of accounts receivables in Dec 31, 2011 balance sheet = Ending Accounts Receivable -  Ending Balance of Allowance for Doubtful Accounts

= $300,000 - $9,000 = $291,000

Solution 4:

Solution 5:

Net Realizable value of accounts receivables in Jan 8, 2012 balance sheet = (Ending Accounts Receivable -write off of accounts receivable) - (Ending Balance of Allowance for Doubtful Accounts - Write off of accounts receivable)

= ($300,000 - $800) - ($9,000 - $800) = $299,200 - $8,200 = $291,000

Adjusting Journal Entries
Date	Particulars	Debit	Credit
31-Dec-11	Bad Debt expense Dr (900000*90%*1%)	$8,100.00
	To allowance for doubtful accounts		$8,100.00
	(Being allowance for doubtful accounts recorded)