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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
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