Raintree Cosmetic Company sells its products to customers on acredit basis. An adjusting entry for bad debt expense is recordedonly at December 31, the company’s fiscal year-end. The 2020balance sheet disclosed the following:
| |
| Current assets: | | |
| Receivables, net of allowance for uncollectible accounts of$44,000 | $ | 502,000 |
|
During 2021, credit sales were $1,820,000, cash collections fromcustomers $1,900,000, and $53,000 in accounts receivable werewritten off. In addition, $4,400 was collected from a customerwhose account was written off in 2020. An aging of accountsreceivable at December 31, 2021, reveals the following:
| Percentage of Year-End | Percent |
| Age Group | Receivables in Group | Uncollectible |
| 0?60 days | 65 | % | 4 | % |
| 61?90 days | 15 | | 10 | |
| 91?120 days | 15 | | 30 | |
| Over 120 days | 5 | | 50 | |
|
Required:
1. Prepare summary journal entries to account forthe 2021 write-offs and the collection of the receivable previouslywritten off.
2. Prepare the year-end adjusting entry for baddebts according to each of the following situations:
- Bad debt expense is estimated to be 3% of credit sales for theyear.
- Bad debt expense is estimated by adjusting the allowance foruncollectible accounts to the balance that reduces the carryingvalue of accounts receivable to the amount of cash expected to becollected. The allowance for uncollectible accounts is estimated tobe 10% of the year-end balance in accounts receivable.
- Bad debt expense is estimated by adjusting the allowance foruncollectible accounts to the balance that reduces the carryingvalue of accounts receivable to the amount of cash expected to becollected. The allowance for uncollectible accounts is determinedby an aging of accounts receivable.
3. For situations (a)?(c) in requirement 2above, what would be the net amount of accounts receivable reportedin the 2021 balance sheet?
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