Question #2-Accounting for Bad Debts_..25 marko Xach Company had the following A
ID: 2573887 • Letter: Q
Question
Question #2-Accounting for Bad Debts_..25 marko Xach Company had the following Account balances on January 1, 2017 Accounts Receivable $220,000 (Dr) $.65,000 (Cr) Allowance for doubtful account Yach Company had the following summary transactions during 2017: 1. 2. 3. Total Sales for 2017 amounted to $1,500,000, 80% of which were on account. The Collections during year totaled $1,150,000 $63,000 were written-off as uncollected during the year Yach Company uses the Allowance method for Bad Debt Expense and the bad debt expense is estimated to be 2.5% of all Acc. Receivables Required: 1. Prepare Journal entry to record Xach Company Bad Debt Expense and the Write-offs under the Allowance Method 2. Determine the Bad Debt Expense for 2017. 3. Determine the Net Accounts Receivable balance on December 31, 2017 4. Assume after the above entries the Auditor discovered an additional $2,500 should be written off.m.no adjustment was made....So.... how will the following items of Xach Company be affected (ie. for items below.... Increased, Decreased, No Change) by this? a. Bad Debt Expense for 2017. b. Accounts Receivable on December 31,2017. c. Net Accounts Receivable on December 31, 2017.Explanation / Answer
Account titles Debit Credit 1 Allowance for doubtful accounts 63000 Accounts receivable 63000 (Amounts written off as uncollected) Baddebt expense 30000 Allowance for doubtful accounts 30000 (Refer part 2) (Baddebt expenses to be adjusted) 2 Baddebt expenses for 2017=Accounts receivable*2.5% Accounts receivable=Total sales*80%=1500000*80%=1200000 Baddebt expenses=1200000*2.5%=30000 3 Net accounts recerivable balance as on Dec 31,2017=Accounts receivable as on Jan 1,2017-Amounts written off as uncollected-Allowance for doubtful accounts as on Dec31,2017 Allowance for doubtful accounts as on Dec 31,2017=65000 (Cr)+63000 (Dr)+30000 (Cr)=32000 (Cr) Net accounts recerivable balance as on Dec 31,2017=220000-63000-32000=125000 4 Entry would be Allowance for doubtful accounts 2500 Accounts receivable 2500 (Amounts written off as uncollected) a. Baddebt expense for 2017 will not change b. Accounts receivable as on Dec 31,2017 will decrease by 2500 New accounts receivable as on Dec 31,2017=220000-63000-2500=154500 c.Net accounts recerivable balance as on Dec 31,2017=Accounts receivable as on Jan 1,2017-Amounts written off as uncollected-Allowance for doubtful accounts as on Dec31,2017 Allowance for doubtful accounts as on Dec 31,2017=32000-2500=29500 Net accounts receivable balance as on Dec 31,2017=220000-63000-2500-29500=125000 Net accounts receivable balance will not change