90.2K

Verified Solution

Link Copied!

Required information

[The following information applies to the questions displayed below.] Blue Skies Equipment Company uses the aging approach to estimate bad debt expense at the end of each accounting year. Credit sales occur frequently on terms n/60. The balance of each account receivable is aged on the basis of three time periods as follows: (1) not yet due, (2) up to one year past due, and (3) more than one year past due. Experience has shown that for each age group, the average loss rate on the amount of the receivable at year-end due to uncollectibility is (a) 2 percent, (b) 13 percent, and (c) 33 percent, respectively.

At December 31, 2019 (end of the current accounting year), the Accounts Receivable balance was $49,100 and the Allowance for Doubtful Accounts balance was $1,050 (credit). In determining which accounts have been paid, the company applies collections to the oldest sales first. To simplify, only five customer accounts are used; the details of each on December 31, 2019, follow:

B. BrownAccount Receivable
Date	Explanation	Debit	Credit	Balance
03/11/2018	Sale	13,100		13,100
06/30/2018	Collection		3,100	10,000
01/31/2019	Collection		3,200	6,800

D. DonaldsAccount Receivable
Date	Explanation	Debit	Credit	Balance
02/28/2019	Sale	21,000		21,000
04/15/2019	Collection		9,000	12,000
11/30/2019	Collection		5,200	6,800

N. NapierAccount Receivable
Date	Explanation	Debit	Credit	Balance
11/30/2019	Sale	8,300		8,300
12/15/2019	Collection		1,100	7,200

S. StrothersAccount Receivable
Date	Explanation	Debit	Credit	Balance
03/02/2017	Sale	4,900		4,900
04/15/2017	Collection		4,900	0
09/01/2018	Sale	9,600		9,600
10/15/2018	Collection		3,600	6,000
02/01/2019	Sale	21,400		27,400
03/01/2019	Collection		6,600	20,800
12/31/2019	Sale	2,900		23,700

T. ThomasAccount Receivable
Date	Explanation	Debit	Credit	Balance
12/30/2019	Sale	4,600		4,600

2. Compute the estimated uncollectible amount for each age category and in total. Amount Not yet due Up to one year past due More than one year past due Total $ 3. Prepare the adjusting entry for bad debt expense at December 31, 2019. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.) View transaction list Journal entry worksheet Record the adjusting entry for bad debt expense at December 31, 2019. Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal 4. Show how the amounts related to accounts receivable should be presented on the 2019 income statement and balance sheet. Complete this question by entering your answers in the tabs below. Income Stat Bal Sheet Show how the amounts related to accounts receivable should be presented on the 2019 income statement. BLUE SKIES EQUIPMENT COMPANY Income Statement (partial) For the Year Ended December 31, 2019 Operating expenses: 4. Show how the amounts related to accounts receivable should be presented on the 2019 income statement and balance sheet. Complete this question by entering your answers in the tabs below. Income Stat Bal Sheet Show how the amounts related to accounts receivable should be presented on the 2019 balance sheet. (Amounts to be deducted should be indicated by a minus sign.) BLUE SKIES EQUIPMENT COMPANY Balance Sheet (partial) As of December 31, 2019 Current assets

Answer & Explanation Solved by verified expert

See Answer