Tubbs Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31 2015 and December 31 2016 appear below: $\begin{array}{lrr}
&21/31/15&12/31/16\
\text { Net Credit Sales } & \$ 300,000 & \$ 400,000 \
\text { Accounts Receivable } & 60,000 & 80,000 \
\text { Allowance for Doubtful Accounts } & 4,800 & ?
\end{array}$
Instructions
(a) Record the following events in 2016.
Aug. 10 Determined that the account of L. Young for $600 is uncollectible.
Sept. 12 Determined that the account of J. E. Ford for $3400 is uncollectible.
Oct. 10 Received a check for $400 as payment on account from L. Young whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.
Nov. 15 Received a check for $200 from L. Young as payment on her account.
(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31 2016.
(c) What is the balance of Allowance for Doubtful Accounts at December 31 2016?

Question

Tubbs Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31 2015 and December 31 2016 appear below: $\begin{array}{lrr}
&21/31/15&12/31/16\
\text { Net Credit Sales } & \$ 300,000 & \$ 400,000 \
\text { Accounts Receivable } & 60,000 & 80,000 \
\text { Allowance for Doubtful Accounts } & 4,800 & ?
\end{array}$
 Instructions
(a) Record the following events in 2016.
Aug. 10 Determined that the account of L. Young for $600 is uncollectible.
Sept. 12 Determined that the account of J. E. Ford for $3400 is uncollectible.
Oct. 10 Received a check for $400 as payment on account from L. Young whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.
Nov. 15 Received a check for $200 from L. Young as payment on her account.
(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31 2016.
(c) What is the balance of Allowance for Doubtful Accounts at December 31 2016?

Quizplus · Accepted Answer

The Answer of Tubbs Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 1% of net credit sales will eventually be uncollectible. Selected account balances at December 31 2015 and December 31 2016 appear below: $\begin{array}{lrr}
&21/31/15&12/31/16\
\text { Net Credit Sales } & \$ 300,000 & \$ 400,000 \
\text { Accounts Receivable } & 60,000 & 80,000 \
\text { Allowance for Doubtful Accounts } & 4,800 & ?
\end{array}$
 Instructions
(a) Record the following events in 2016.
Aug. 10 Determined that the account of L. Young for $600 is uncollectible.
Sept. 12 Determined that the account of J. E. Ford for $3400 is uncollectible.
Oct. 10 Received a check for $400 as payment on account from L. Young whose account had previously been written off as uncollectible. She indicated the remainder of her account would be paid in November.
Nov. 15 Received a check for $200 from L. Young as payment on her account.
(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31 2016.
(c) What is the balance of Allowance for Doubtful Accounts at December 31 2016?

Tubbs Sign Company Uses the Allowance Method in Accounting for Uncollectible