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Question: slide 2212 raintree cosmetic company sells its products to customers...

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Slide 22-12

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the company’s fiscal year-end. The 2017 balance sheet disclosed the following:

Current assets;

          Receivables, net of allowance for uncollectible accounts of $33,000                $447,000

During 2018, credit sales were $1,765,000, cash collections from customers $1,845,000, and $38,000 in accounts receivable were written off. In addition, $3,300 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following:

                                     

Age Group

Percentage of Year-End

Receivables in Group

Percent

Uncollectible

0-60 days

70%

    5%

61-90 days

20

15

91-120

5

20

Over 120 days

5

40

Required:

  1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off.
  2. Prepare the year-end adjusting entry for bad debts according to each of the following situations:
  1. Bad debt expense is estimated to be 4% of credit sales for the year.
  2. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
  3. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

  1. For situations (a)-(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

Complete the following questions by entering your answers below.

  1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off. (If no entry is required for a transaction/event, write “No journal entry required” in the first account title.
  1. Record accounts receivable written off during the year 2018.
  2. Record entry to reinstate an account receivable previously written off.
  3. Record collection of an account receivable previously written off.
  1. Prepare the year-end adjusting entry for bad debts.
  1. Bad debt expense is estimated to be 4% of credit sales for the year.
  2. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.
  3. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable.

Note: Enter debits before credits.

Event

General Journal

Debit

Credit

Net account receivable reported

a.______________________

b.______________________

c.______________________

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