Reference no: EM132466644

Sam and Robert are identical twins. They opened identical businesses and experienced identical transactions. However, they decided to estimate uncollectible accounts in different ways. Sam elected to use the percentage of sales method, and Robert elected to use the percentage of receivables method. Listed below are the beginning balances of Cash, Accounts Receivable, and Allowance for Doubtful Accounts [items (a)-(c)], and summary transactions that occurred during the year [items (d)-(g)] for both businesses. Remember, both businesses experienced the same events: credit sales, collections of receivables, and write-offs. The only difference between the businesses is the method of estimating uncollectible accounts.

Sam

(a) Balance of Cash, January 1, 20--$300,000

(b) Balance of Accounts Receivable, January 150,000

(c) Balance of Allowance for Doubtful Accounts, January 15,000

(d) Sales on account during 20--550,000

(e) Collections on account during 20--530,000

(f) Uncollectible accounts written off during 20--4,500

(g) Collections made on accounts written off during 20--500

Required:

Question 1. Enter items (a) through (c) in general ledger accounts for Sam.

Question 2. Prepare entries in a general journal for summary transactions (d) through (g) for Sam.

Question 3. Post the entries to a general ledger for Sam, using the following accounts and numbers.

Cash                                       101

Accounts Receivable                  122

Allowance for Doubtful Accounts 122.1

Sales                                     401

Bad Debt Expense                     532

Question 4. Sam estimates that 1% of all sales on account will be uncollectible. Calculate the estimated bad debt expense and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--.

Question 5. Compute the net realizable value of Sam's accounts receivable on December 31, 20--.