TravelToday disclosed the following rounded amounts in thous

TravelToday, disclosed the following rounded amounts (in thousands) concerming the Allowance for Doubtfl Accounts on its Form 10-K annual report Valuation and Qualifying Accounts dollars in thousands) Additions Charged to Bad Debt Expense Balance at End of Allowance for Balance at of Year Write-Offs Year 2012 2011 2010 S 8.300 7.300 1,800 $3,650 4,250 550 850 $11,100 8,300 3,250 7,300 Required: Tay Prepare a T account for the Alowance for Doubtful Accounts and enter into it the 2011 amounts fronm the above schedule The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance. (Enter your answers in thousands.) Allowance for Doubtful Accounts Beg Bal End Bal 1-b. Wine the T-account in equation format so prove that the above insens account for the changes in the account (Enter your answers in thousands.) Ending Bala

Solution

1a Allowance for doubtful accounts $        7,300 Beg Bal Write Offs $        3,250 $        4,250 Bad Debt expense $        8,300 End Bal 1b Beginning balance + Bad Debt Expense – Write Offs = Ending balance $7300 + 4250 – 3250 = $8300 2 (a) Bad Debt Expense 3650 Allowance for Doubtful Accounts 3650 (b) Allowance for Doubtful Accounts 850 Accounts Receivable 850 3 Allowance for Doubtful Accounts Balance at Beginning of Year Additions Charged to Bad Debt Expense Write Offs Balance at End of Year 2010 11800 550 5050 7300 (11800+550-5050 = 7300) 4 Net Receivables is not affected when accounts are written off. The decrease in Accounts Receivable is offset by a decrease in the Allowance for Doubtful Accounts. Net Income would also not be affected as the expense for these estimated bad debts was incurred when the allowance was set up during the period in which the revenues were recorded.