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Question 1 The Kingsmill Furniture Company sells its products, offering 30 days’ credit to its customers. Uncollectible...

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Accounting

Question 1

The Kingsmill Furniture Company sells its products, offering 30days’ credit to its customers. Uncollectible amounts are estimatedto be equal to 2% of credit sales. At the end of the year, theallowance for doubtful accounts is adjusted based on an aging ofaccounts receivable. The company began 2017 with the followingbalances in its accounts:

Accountsreceivable               $305,000

Allowance for doubtful accounts       (25,500)

During 2017, sales on credit were $1,300,000, cash collectionsfrom customers were $1,250,000 and actual write-offs of accountswere $25,000. An aging of accounts receivable at the end of 2017indicates a required allowance of $30,000.

Required:

1. Determine the balances in accounts receivable and allowancefor doubtful accounts at the end of 2017.

2. Determine the bad debt expense for 2017.

3. Prepare journal entries to accrue bad debts, write-off thereceivables, and the year-end adjusting entry required to adjustthe allowance for doubtful accounts to the required allowance of$30,000. Include explanations for each journal entry.

Answer & Explanation Solved by verified expert
4.3 Ratings (676 Votes)

1.

Beginning accounts receivable $                            305,000
Add: Credit sales $                        1,300,000
Less: Cash collected $                      (1,250,000)
Less: Write off $                            (25,000)
Ending Accounts receivable balance $                          330,000
Ending allowance for doubtful accounts balance $                            30,000

2.

Ending allowance for doubtful accounts balance $    30,000
Less: Beginning allowance for doubtful accounts balance $ (25,500)
Add: Write off $    25,000
Baddebt expenses $    29,500
Account title and explanation Debit Credit
Allowance for doubtful accounts $   25,000
Accounts receivable $   25,000
(To record write off of accounts receivable)
Baddebt expenses   $   29,500
Allowance for doubtful accounts $   29,500
(To record baddebt expenses)

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