Problem 7-6 the balance sheet of starsky company/problem 7-3
Problem 7-6 The balance sheet of Starsky Company at December 31, 2010, includes the following. Notes receivable$36,000 Accounts receivable182,100 Less: Allowance for doubtful accounts 17,300200,800 Transactions in 2010 include the following. 1.Accounts receivable of $318,000 were collected including accounts of $60,000 on which 2% sales discounts were allowed. 2.$5,300 was received in payment of an account which was written off the books as worthless in 2010. (Hint: Reestablish the receivable account) 3.Customer accounts of $17,500 written off during the year. 4.At year-end the Allowance for Doubtful Accounts was estimated to need a balance of $20,000. this estimate is based on an analysis of aged accounts receivable. Instructions Prepare all journal entries necessary to reflect the transactions above
Problem 7-3 (bad-debt reporting – Aging). Manilow Corporation operates in an industry that has a high rate of bad debts. Before any year-end adjustments, the balance in Manilow’s AR account was $555,000 and the Aloowance for Doubtful Accounts had a credit balance of $40,000. The year-end balance reported in the balance sheet for the Allowance for Doubtful Accounts will be based on the aging schedule shown below. Days Account Outstanding Amount Probability of Collection Less than 16 days $300,000 .98 Between 16 and 30 days 100,000 .90 Between 31 and 45 days 80,000 .85 Between 46 and 60 days 40,000 .80 Between 61 and 75 days 20,000 .55 Over 75 days 15,000 .00 Instructions: a)What is the appropriate balance for the Allowance for Doubtful Accounts at year-end? b) Show how AR would be presented on the balance sheet. c)What is the dollar effect of the year-end bad debt adjustment on the before-tax income?
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