a. Prepare Palmetto s January bank reconciliation.
b. Prepare any necessary journal entries for Palmetto.
7. Direct write-off method. Harrisburg Company which began business in early 20X7 reported $40000 of accounts receivable on the December 31 20X7 balance sheet. Included in this amount was $550 for a sale made to Tom Mattingly in July. On January 4 20X8 the company learned that Mattingly had filed for personal bankruptcy. Harrisburg uses the direct write-off method to account for uncollectibles.
a. Prepare the journal entry needed to write off Mattingly s account.
b. Comment on the ability of the direct write-off method to value receivables on the year-end balance sheet.
8. Allowance method: estimation and balance sheet disclosure. The following pre- adjusted information for the Maverick Company is available on December 31:
Accounts receivable $107000
Allowance for uncollectible accounts 5400 (credit balance)
Credit sales 250000
a. Prepare the journal entries necessary to record Maverick s uncollectible accounts expense under each of the following assumptions:
(1) Uncollectible accounts are estimated to be 5% of Credit Sales.
(2) Uncollectible accounts are estimated to be 14% of Accounts Receivable.
b. How would Maverick s Accounts Receivable appear on the December 31 balance sheet under assumption (1) of part (a)?
c. How would Maverick s Accounts Receivable appear on the December 31 balance sheet under assumption (2) of part (a)?
9. Direct write-off and allowance methods: matching approach. The December 31 20X2 year-end trial balance of Targa Company revealed the following account information:
Allowance for Uncollectible Accounts
a. Determine the adjusting entry for bad debts under each of the following condi tions:
(1) An aging schedule indicates that $12420 of accounts receivable will be uncollectible.
(2) Uncollectible accounts are estimated at 2% of net sales.
b. On January 19 20X3 Targa learned that House Company a customer had declared bankruptcy. Present the proper entry to write off House s $950 balance using the allowance method.
c. Repeat the requirement in part (b) using the direct write-off method.
d. In light of the House bankruptcy examine the allowance and direct write-off methods in terms of their ability to properly match revenues and expenses.
10. Allowance method: analysis of receivables. At a January 20X2 meeting the presi dent of Sonic Sound directed the sales staff to move some product this year. The president noted that the credit evaluation department was being disbanded be cause it had restricted the company s growth. Credit decisions would now be made by the sales staff.
By the end of the year Sonic had generated significant gains in sales and the president was very pleased. The following data were provided by the accounting department:
Accounts Receivable 12/31
Allowance for Uncollectible Accounts 12/31
23000 cr.The $12444000 receivables balance was aged as follows:
Age of Receivable
Percentage of Accounts Expected to Be Collected
Under 31 days
Over 90 days
60Assume that no accounts were written off during 20X2.
a. Estimate the amount of Uncollectible Accounts as of December 31 20X2.
b. What is the company s Uncollectible Accounts expense for 20X2?
c. Compute the net realizable value of Accounts Receivable at the end of 20X1 and 20X2.
d. Compute the net realizable value at the end of 20X1 and 20X2 as a percentage of respective year-end receivables balances. Analyze your findings and comment on the president s decision to close the credit evaluation department.
Instructions: a. Prepare Palmetto s January bank reconciliation. b. Prepare any