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P7-2 (Bad-Debt Reporting) Presented below are a series of unrelated situations.

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P7-2 (Bad-Debt Reporting) Presented below are a series of unrelated situations.

1. Halen Company’s unadjusted trial balance at December 31, 2010, included the following accounts.

Debit Credit
Allowance for doubtful accounts $4,000
Net sales $1,200,000

Halen Company estimates its bad debt expense to be 112% of net sales. Determine its bad debt
expense for 2010.

2. An analysis and aging of Stuart Corp. accounts receivable at December 31, 2010, disclosed the
following.

Amounts estimated to be uncollectible $ 180,000
Accounts receivable 1,750,000
Allowance for doubtful accounts (per books) 125,000

What is the net realizable value of Stuart’s receivables at December 31, 2010?

3. Shore Co. provides for doubtful accounts based on 3% of credit sales. The following data are
available for 2010.

Credit sales during 2010 $2,400,000
Allowance for doubtful accounts 1/1/10 17,000
Collection of accounts written off in prior years
(customer credit was reestablished) 8,000
Customer accounts written off as uncollectible during 2010 30,000

What is the balance in the Allowance for Doubtful Accounts at December 31, 2010?

4. At the end of its first year of operations, December 31, 2010, Darden Inc. reported the following
information.

Accounts receivable, net of allowance for doubtful accounts $950,000
Customer accounts written off as uncollectible during 2010 24,000
Bad debt expense for 2010 84,000

What should be the balance in accounts receivable at December 31, 2010, before subtracting the
allowance for doubtful accounts?

5. The following accounts were taken from Bullock Inc.’s trial balance at December 31, 2010.

Debit Credit
Net credit sales $750,000
Allowance for doubtful accounts $ 14,000
Accounts receivable 310,000

If doubtful accounts are 3% of accounts receivable, determine the bad debt expense to be reported
for 2010.

Instructions
Answer the questions relating to each of the five independent situations as requested.

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