Prepare the account for allowance for bad debts, Accounting Basics

Assignment Help:

The 31st December 2009 trial balance of Anika Co. reported the following information.

Dr. Cr. Allowance for Bad Debts........................... $2,300

During the year 2010 the following selected transactions are available:

5 January 2010 Anika wrote off the balance due from Michael as a bad debt amounted to $900. 19 April Peter was unable to pay his account balance of $1,500. He accepted $1,500 10% bill to settle his obligation with Anika on 30th July.

30 June Anika collected the bill in full amount on due that with the interest.

31 December Anika uses allowance method to estimate bad debt expense using balance sheet approach. An aging schedule indicates that $1,200 of accounts receivable will be uncollectible. 31 December Anika had an Accounts Receivable Balance of $41,000

Required:

a. Create a worksheet in your excel file and name it "Part A Q3". In column A to E set up general journal and input the necessary journal entries to record the transactions and events listed above. Explanations (narrations) for your journal entries are required. Copy it to the word document. Clearly show all supporting calculations in the columns to the right of the journal entries. Leave column G empty and input the heading "Calculations area:" in cell H1. Perform all calculations in this area of the worksheet. Show the calculations in narrative form in the cell next to the cell containing the formula (e.g. "($20,000*0.08=$1,600)"). Calculations should be rounded to the nearest cent (i.e. to two decimal places). Copy all the calculations to the word document.

b. Based on the transaction on 5th January 2010, do you think that the bad debt estimation was correct in 2009? Record your answer in word document.

c. In the rows below your journal, create a running balance ledger account. Prepare the account for Allowance for Bad Debts. To arrive at closing you must use the formula and these formulae will be checked. Copy it to the word document.

d. What closing balance of Allowance for Bad Debts you have arrived at? Is this balance equal to balance estimated as per ageing schedule (i.e. $ 1,500)? Why or why not? Give explanations. Record your answer in word document.

e. In the rows below the running balance ledger account, provide an extract from the balance sheet for the end of December 2010, showing how the assets from the transactions above would be reported under the Current Assets heading in the balance sheet. Copy it to the word document.


Related Discussions:- Prepare the account for allowance for bad debts

Create a balance sheet and manage accounting entries, Two companies enter ...

Two companies enter into loan agreements on 1 March 2012. On that date they also enter into an agreement to swap the loans. The details for each company and loan are: L R R Hood

Sales returns and allowances account, Q. Sales Returns and Allowances accou...

Q. Sales Returns and Allowances account? The Sales Returns and Allowances account is the contra revenue account to Sales that records the selling price of merchandise returned

Define workout expenditures, Workout Expenditures Professional fees (le...

Workout Expenditures Professional fees (legal, accounting, appraisal) paid to entities unaffiliated with the investment company's advisor or sponsor in connection with any of t

calculate the gain or loss of company, During the tracking period, 18 Marc...

During the tracking period, 18 March to 21 April 2011, your team is to monitor the performance of the shares and the overall performance of the Australian share-market.  Can you ma

What is matching principle, Q. What is matching principle? Expense reco...

Q. What is matching principle? Expense recognition is closely related to as well as sometimes discussed as part of the revenue recognition principle. The matching principle sta

What is the meaning of fica tax, FICA Tax (Social Security) Both the...

FICA Tax (Social Security) Both the employee and the employer contribute equally. OASDI has a Taxable Wage Base that is the maximum amount of earnings during a calendar y

Accounting personnel, There is almost not, any organization that does not h...

There is almost not, any organization that does not have an accountant. His task is all pervasive and he is included in a broad range of activities, particularly in a huge and comp

Exercise 5-3 analyzing and recording merchandise, Exercise 5-3 Analyzing an...

Exercise 5-3 Analyzing and recording merchandise transactions-both buyer and seller LO P1, P2 Santa Fe Company purchased merchandise for resale from Mesa Company with an invo

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd