Reference no: EM132477278

Uncollectible Accounts

C&N Ltd, is a manufacturer that makes all sales on a 30-days credit terms. Annual sales are approximately $25 million. At the end of 2016 accounts receivable were presented in the company's Balance Sheet as below:

Accounts Receivable $2,350,000

Less: Allowance for Doubtful accounts $70,000

Point 1: During 2017, $740,000 in accounts receivable were written off as uncollectible. Of these amounts written off, receivables totaling $24,000 were unexpectedly collected. At the end of 2017, an aging of accounts receivable indicated a need for an $80,000 allowance to cover possible failure to collect the accounts currently outstanding.

Point 2: C&N Ltd makes adjusting entries in its accounting records only at year end.

Required:

Question 1: Explain the difference between making an allowance for bad debts, and writing off a bad debt. Explain how each case is treated and shown in accounting.

Question 2: Prepare one journal entry to summarize all accounts written off against the allowance for doubtful accounts in 2017.

Question 3: Prepare entries to record the $24,000 in accounts receivable which were unexpectedly collected.

Question 4: Prepare an adjusting entry on 31 December 2017 to increase the allowance for doubtful accounts to $80,000