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Tutorial 4

The document outlines financial accounting exercises related to Avett Furniture Store and Handel Company, focusing on estimating uncollectible accounts and recording related transactions. It includes instructions for preparing adjusting entries, balance sheet presentations, and journal entries for sales and write-offs. Specific figures and calculations are provided for accounts receivable, allowance for doubtful accounts, and cash realizable value.

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67 views2 pages

Tutorial 4

The document outlines financial accounting exercises related to Avett Furniture Store and Handel Company, focusing on estimating uncollectible accounts and recording related transactions. It includes instructions for preparing adjusting entries, balance sheet presentations, and journal entries for sales and write-offs. Specific figures and calculations are provided for accounts receivable, allowance for doubtful accounts, and cash realizable value.

Uploaded by

shahdshosho1500
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Intermediate Financial Accounting

Tutorial 4 & 5
Ex. 203
Avett Furniture Store has credit sales of $400,000 in 2014 and a debit balance of $600 in the
Allowance for Doubtful Accounts at year end. As of December 31, 2014, $130,000 of accounts
receivable remain uncollected. The credit manager prepared an aging schedule of accounts
receivable and estimates that $7,000 will prove to be uncollectible.
On March 4, 2015, the credit manager authorizes a write-off of the $1,200 balance owed by B.
Fernitti.
Instructions
(a) Prepare the adjusting entry to record the estimated uncollectible accounts expense in 2014.
(b) Show the balance sheet presentation of accounts receivable on December 31, 2014.
(c) On March 4, before the write-off, assume the balance of Accounts Receivable account is
$160,000 and the balance of Allowance for Doubtful Accounts is a credit of $3,000. Make
the appropriate entry to record the write-off of the Ferntti account. Also show the balance
sheet presentation of accounts receivable before and after the write-off.
Solution 203
(a) Bad Debt Expense ($7,000 + $600)........................... 7,600

Allowance for Doubtful Accounts........................ 7,600

(b) Accounts Receivable...................................................$130,000

Less: Allowance for Doubtful Accounts...................... 7,000 $123,000

(c) Allowance for Doubtful Accounts................................ 1,200

Accounts Receivable—B. Ferntti......................... 1,200

Before Write-off After Write-off

Accounts Receivable $160,000 $158,800

Less: Allowance for Doubtful Accounts 3,000 1,800

Cash Realizable Value $157,000 $157,000


Ex. 202
Handel Company uses the allowance method for estimating uncollectible
accounts. Prepare journal entries to record the following transactions:

January5 Sold merchandise to Terry Richman for $2,000, terms n/15.

April 15 Received $600 from Terry Richman on account.

August21 Wrote off as uncollectible the balance of the Terry Richman


account when she declared bankruptcy.

October5 Unexpectedly received a check for $300 from Terry Richman. It is


not felt any more will be received from Richman

Ans: N/A, LO: 3, Bloom: AP, Difficulty: Medium, Min: 10, AACSB: Analytic, AICPA BB: Legal/Regulatory Perspective, AICPA FN:
Measurement, AICPA PC: Problem Solving, IMA: FSA

Solution 202 (10 min.)


January5 Accounts Receivable—T. Richman.................... 2,000

Sales Revenue........................................... 2,000

April 15 Cash................................................................. 600

Accounts Receivable—T. Richman............. 600

August21 Allowance for Doubtful Accounts...................... 1,400

Accounts Receivable—T. Richman............. 1,400

October5 Accounts Receivable—T. Richman.................... 300

Allowance for Doubtful Accounts.............. 300

Cash................................................................. 300

Accounts Receivable—T. Richman............. 300

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