60.1K

Verified Solution

Link Copied!

E$6-23($Algo$)$ Recording, Reporting, and Evaluating a Bad Debt Estimate Using Aging Analysis LO$6-2$

Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged on

the basis of three time periods as follows: $(1)$ not yet due, $$16,000$; $(2)$ up to $120$ days past due, $$9,000$; and $(3)$ more than $120$ days

past due, $$4,000.$ Experience has shown that for each age group, the average loss rate on the amount of the receivables at year$-$end

due to uncollectibility is $(1)2$ percent, $(2)13$ percent, and $(3)30$ percent, respectively. At December $31($end of the current year$),$ the

Allowance for Doubtful Accounts balance is $$770($credit$)$ before the end$-$of$-$period adjusting entry is made.

Data during the current year follow:

a$.$ During December, an Account Receivable $($Patty$\text{'}$s Bake Shop$)$ of $$720$ from a prior sale was determined to be uncollectible;

therefore, it was written off immediately as a bad debt.

b$.$ On December $31,$ the appropriate adjusting entry for the year was recorded.

Required:

Give the required journal entries for the two items listed above.

Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and

balance sheet for the current year. Disregard income tax considerations. Answer is not complete.

Complete this question by entering your answers in the tabs below.

Req $1$

Req $2$ A

Req $2$B

Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement for

the current year. Disregard income tax considerations.Answer is not complete.

Complete this question by entering your answers in the tabs below.

Req $2$ A

Req $2$B

Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet for current year. Disregard income tax considerations. $($Amounts to be deducted should be indicated by a minus sign.$)$

$\backslash$table$[[$BROWN COW DAIRY$],[$Balance Sheet $($Partial$)],[$As of December $31],[$Current assets:$],[$Accounts receivable,

u $,$$$,28,280\backslash$times $,],[$Allowance for doubtful accounts,$($V$),-2690,],[,,$$$,25,590]]$

Answer & Explanation Solved by verified expert

See Answer