Accounts receivable practice problems
1. The following is information about Solveit Co.
Accounts receivable at 1/1/00 - $500,000 debit
Sales during 2000 (80% are credit sales) 6,000,000
Collections on account during 2000 (including collections on accounts
previously written off) -
4,650,000
Allowance for doubtful accounts at 1/1/00 - 60,000 credit
Accounts written off during 2000 - 55,000
Accounts recovered during 2000 - 3,000
a. Determine the entry to record bad debt expense at 12/31/00
based on the following
independent scenarios
1. Uncollectible accounts are estimated
to be 1.5% of credit sales.
Total sales
6,000,000
Credit portion
.80
Credit sales
4,800,000
Bad debt expense = credit sales * rate = $4,800,000 * .015 = $72,000
Entry:
Bad debt expense
72,000
Allowance for uncollectible
accounts
72,000
2. Based on an aging of accounts receivable
at 12/31/00, an allowance of $85,000 is
considered appropriate.
Bad debt expense will equal the amount needed
to adjust the allowance to the appropriate balance
Allowance 1/1
(60,000) credit
write offs
55,000 debit
recoveries
(3,000) credit
Balance prior to adjustment
(8,000) credit
Balance needed
(85,000) credit
Adjustment needed
(77,000) credit
Entry:
Bad debt expense
77,000
Allowance for uncollectible
accounts
77,000
b. Calculate the balance in accounts receivable at 12/31.
Accounts receivable at 1/1
$500,000
Credit sales 6,000,000 * .80
4,800,000
Collections on account
(4,650,000)
Accounts written off
(55,000)
Accounts reinstated due to subsequent
recovery
3,000
Accounts receivable 12/31
$598,000
2. Determine the bad debt expense for 2000 for Whatisit Co.
based on the following
information:
Allowance for doubtful accounts 1/1 - $35,000 credit balance
Accounts written off during the year - 50,000
Recoveries during the year - 4,000
Allowance for doubtful accounts 12/31 - $40,000 credit balance
Allowance 1/1
($35,000)
Accounts written off
50,000
Recoveries
(4,000)
Expense
?
Allowance 12/31
($40,000)
Expense must be $51,000