Determine bad debt expense and prepare the adjusting entry
Course:- Accounting Basics
Reference No.:- EM131900337

Assignment Help
Expertsmind Rated 4.9 / 5 based on 47215 reviews.
Review Site
Assignment Help >> Accounting Basics

Questions -

1. What are the essential features of the allowance method of accounting for bad debts?

2. Lauren Anderson cannot understand why the cash realizable value does not decrease when an uncollectible account is written off under the allowance method. Clarify this point for Lauren.

Determine bad debt expense, and prepare the adjusting entry.

3. Hachey Company has accounts receivable of $95,100 at March 31, 2007. An analysis of the accounts shows these amounts.

Balance, March 31 Month of Sale

2007 2006

March $65,000 $75,000

February 12,600 8,000

December and January 10,100 2,400

November and October 7,400 1,100

$95,100 $86,500

Credit terms are 2/10, n/30. At March 31, 2007, there is a $2,200 credit balance in Allowance for Doubtful Accounts prior to adjustment. The company uses the percentage of receivables basis for estimating uncollectible accounts. The company's estimates of bad debts are as shown on page 402.

1. Age of Accounts

Estimated Percentage Uncollectible

Current 2%

1-30 days past due 7

31-90 days past due 30

Over 90 days 50

2. Instructions

a) Determine the total estimated uncollectibles.

b) Prepare the adjusting entry at March 31, 2007, to record bad debts expense.

c) Discuss the implications of the changes in the aging schedule from 2006 to 2007.

4. For several years, a number of Food Lion, Inc., grocery stores were unprofitable. The company closed, and continues to close, some of these locations. It is apparent that the company will not be able to recover the cost of the assets associated with the closed stores. Thus, the current value of these impaired assets must be written down (see the Case in Point on page 381).

A recent Food Lion income statement reports a $9.5 million charge against income pertaining to the write-down of impaired assets.

Explain why Food Lion must write down the current carrying value of its unprofitable stores.

Explain why the recent $9.5 million charge to write down these impaired assets is considered a noncash expense.

Put your comment

Ask Question & Get Answers from Experts
Browse some more (Accounting Basics) Materials
For 2010, stoneland corporation reported net income, 24,000; net sales 400,000; and average shares outstanding, 6,000. there werte no preferred stock dividends. What was the
Every business tries to attract and hire the right people for the job they seeking. However, most managers or temporary services are not fully trained properly on avoiding
Each of the following items may be classified as operating or financing activities under IFRS exceptinterest paid or dividends paid or dividends received or all of these answe
Now that you have seen and prepared various financial statements discuss how you think these statements are related to each other and which statement or statements you think
The Loebuck grocery sells milk. The grocer orders milk from a local farmer fro $13 per case and sells for $16 per case. Unsold cases are disposed for $1.5 per case, and each
Ajax Corp's sales last year were $460,000, its operating costs were $362,500, and its interest charges were $12,500. What was the firm's times-interest-earned (TIE) ratio?
Evaluate the criteria for classification of the lease, and describe the nature of the lease. In general, discuss how the lessee and lessor should account for the lease transac
Kolby's Korndogs is looking at a new sausage system with an installed cost of $777,000. This cost will be depreciated straight-line to zero over the project's six-year life,