Reference no: EM132751169

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

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

Required:

Problem a. 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.

Problem b. Prepare one journal entry to summarize all accounts written off against the allowance for doubtful accounts in 2017.

Problem c. Prepare entries to record the $24,000 in accounts receivable which were unexpectedly collected.

Problem d. Prepare an adjusting entry on 31 December 2017 to increase the allowance for doubtful accounts to $80,000.