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 2020 balance sheet disclosed the following: Current assets: Receivables, net of allowance for uncollectible accounts of $48,000 $ 522,000 During 2021, credit sales were $1,840,000, cash collections from customers $1,920,000, and $57,000 in accounts receivable were written off. In addition, $4,800 was collected from a customer whose account was written off in 2020. An aging of accounts receivable at December 31, 2021, reveals the following: Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0−60 days 70 % 5 % 61−90 days 20 15 91−120 days 5 20 Over 120 days 5 40 Required: 1. Prepare summary journal entries to account for the 2021 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: Bad debt expense is estimated to be 4% of credit sales for the year. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by an aging of accounts receivable. 3. For situations (a)−(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2021 balance sheet? Journal entry worksheet Record entry to reinstate an account receivable previously written off. Record collection of an account receivable previously written off. Note: Enter debits before credits. Event General Journal 3

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Answer:

Answer for the question is mentioned in the attachment.

Explanation:

1. The preparation of Summary Journal Entries to account for the 2021 write-offs and the collection of the receivables previously written off is as follows for Raintree Cosmetic Company:

Debit Allowance for Doubtful Accounts $57,000

Credit Accounts Receivable $57,000

Debit Accounts Receivable $4,800

Credit Allowance for Doubtful Accounts $4,800

  • To record the recovery of previously written-off accounts.

Debit Cash $4,800

Credit Accounts Receivable $4,800

  • To record the cash collections from previously written-off accounts.

2. The preparation of the year-end adjusting entry for bad debts, according to each of the following situations, is as follows for Raintree Cosmetic Company:

a) Bad debt expense is estimated to be 4% of credit sales for the year.

Debit Bad Debt Expense $73,600

Credit Allowance for Doubtful Accounts $73,600

Bad Debt Expense = $73,600 ($1,840,000 x 4%)

Allowance for Doubtful Accounts

Beginning balance          $48,000

Accounts receivable        (57,000)

Accounts receivable           4,800

Ending balance                (69,400)

Bad Debts Expense      $73,600

b) Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable.

Debit Bad Debt Expense $39,100

Credit Allowance for Doubtful Accounts $39,100

Allowance for Doubtful Accounts

Beginning balance          $48,000

Accounts receivable        (57,000)

Accounts receivable           4,800

Ending balance                (43,300) ($433,000 x 10%)

Bad Debts Expense       $39,100

c) Bad debt expense is estimated by adjusting the allowance for uncollectible accounts to the balance that reduces the carrying value of accounts receivable to the amount of cash expected to be collected. The allowance for uncollectible accounts is determined by the aging of accounts receivable.

Debit Bad Debt Expense $36,935

Credit Allowance for Doubtful Accounts $36,935

Allowance for Doubtful Accounts

Beginning balance          $48,000

Accounts receivable        (57,000)

Accounts receivable           4,800

Ending balance                  (41,135)

Bad Debts Expense       $36,935

3. The net amount of accounts receivable reported in the 2021 balance sheet for Raintree Cosmetic Companyis:

Situations:

a) Accounts receivable                 $433,000

Allowance for Doubtful accounts   (69,400)

Net Accounts receivable           $363,600

b) Accounts receivable                 $433,000

Allowance for Doubtful accounts   (43,300)

Net Accounts receivable           $389,700

c) Accounts receivable                 $433,000

Allowance for Doubtful accounts     (41,135)

Net Accounts receivable            $391,865

Data and Calculations:

Current assets:

Receivables, (net of allowance for uncollectible accounts of $48,000)

                                                           $570,000

2021 Credit sales of                        $1,840,000

Cash collections from customers ($1,920,000)

Written off accounts,                         ($57,000)

Receivables balance                       $433,000

Aging of Accounts Receivable at December 31, 2021:

Age Group    Percentage of Year-End      Percent             Amount

                        Receivables in Group    Uncollectible   Uncollectible

0−60 days                    70% ($303,100)          5%               $15,155

61−90 days                   20% ($86,800)           15%              12,990

91−120 days                    5%  ($21,650)          20%               4,330

Over 120 days                5%  ($21,650)          40%               8,660

Total estimated uncollectible                                           $41,135

Learn more about estimating uncollectible accounts at https://brainly.com/question/13450791

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