SANCHEZ COMPUTER CENTER

SANCHEZ COMPUTER CENTER

The Sanchez Computer Center currently has an $10,900 balance in Accounts Receivable. Here is a current schedule of Accounts Receivable:

Sanchez Computer Center
Schedule of Account Receivable
March 31, 201X
Taylor Golf		$3,200
Vita Needle		6,800
Accu Pac		900
Total		$10,900

Figure 1

Tasks

Although Accu Pac’s account is not 90 days past due, Freedman has determined that it is necessary to write off the entire balance because the business has been foreclosed. Make the necessary journal entry using the direct write-off method.

1. The following accounts have been added to the chart of accounts: Bad Debt Expense #5140.
2. Open Kellogg’s Annual ReportsSee Supplemental Financial Data and find the balance in Allowance for Doubtful Accounts for the most recent year.
3. Sigmund Company completed the following transactions in 2012:

• Jan. 9     Sold merchandise on account to Roger’s Supply, $1,200.
• Jan. 15     Wrote off the account of Pete Ramirez as uncollectible because of his death, $500.
• Mar. 17     Received $450 from Roland Co., whose account had been written off in 2011. The account was reinstated and the collection recorded.
• Apr. 9     Received 18% of the $4,100 owed by Lane Danks. The remainder was written off as uncollectible.
• June 15     The account for Mae’s Garage was reinstated for $1,500. The account was written off three years ago and collected in full today.
• Oct. 18     Prepared a compound entry to write the following accounts off as uncollectible: Jim’s Diner, $220; Kross Auto, $460; Reece’s Hardware, $800.
• Nov. 12     Sold merchandise on account to J.B. Rug, $2,200.
• Dec. 31     Based on an aging of Accounts Receivable, it was estimated that $7,000 will be uncollectible out of a total of $165,000 in Accounts Receivable.
• Dec. 31     Closed Bad Debts Expense to Income Summary.

From these transactions as well as the following additional data, complete a–c:

	Acct. No.	Balance
Allowance for Doubtful Accounts	114	$4,200
Income Summary	312
Bad Debt Expense	612

Figure 2

1. Journalize the transactions.
2. Post to Allowance for Doubtful Accounts, Income Summary, and Bad Debts Expense accounts as needed.
3. Prepare a current assets section of the balance sheet. Ending balances needed are as follows: Cash, $13,500; Accounts Receivable, $165,000; Office Supplies, $2,100; Merchandise Inventory, $105,000; Prepaid Rent, $1,350
4. Given the following information and the information in Figure 2,complete a–c.
5. Prepare on December 31, 2012, the adjusting journal entry for Bad Debts Expense.
6. Prepare a partial balance sheet on December 31, 2012, showing how net realizable value is calculated.
7. If the balance in the Allowance for Doubtful Accounts were a $330 debit balance, journalize the adjusting entry for Bad Debts Expense on December 31, 2012.

Balances: Cash, $28,000; Accounts Receivable, $193,000; Allowance for Doubtful Accounts, $330; Merchandise Inventory, $16,000.

Lake Co.
December 31, 2012
			Estimated Percent	Estimated Amount Needed
			Considered to be Bad	in Allowance for
		Amount	Debts Expense	Doubtful Accounts
	Not yet due	$170,000	6%
	0 – 60	8,000	10%
	61 – 180	12,000	23%
	Over six months	3,000	32%
		$193,000

Figure 3

1. Journalize entries for the following situations (assume direct write-off method).

• Situation 1: Wrote off Kathy Mark as a bad debt two years after the sale of $80.
• Situation 2: Reinstated Kathy Mark, who sent in her past due amount two years after it had been written off.
• Situation 3: Wrote off Kathy Mark as a bad debt two years after the sale for $80. (assume allowance method)
• Situation 4: Reinstated Kathy Mark, who sent in her past due amount.

1. Roberts Company had credit sales of $180,000 during 2012. The balance in Allowance for Doubtful Accounts is a $970 debit balance. Journalize the Bad Debts Expense for December 31 using each of the following methods:
2. Bad Debts Expense is estimated at 1.0% of credit sales.
3. The aging of Accounts Receivable indicates that $2,300 will be required in the Allowance account to cover Bad Debts Expense.