Problem 2: Below Is The Aging Schedule For Integration.

Problem 2 Below Is The Aging Schedule For Integration Cos Account R

Problem 2: Below is the aging schedule for Integration Co.’s account receivable: Estimated Percentage Uncollectible Not yet Due $110,000 1% 1–30 days past due 10,000 3% 31–60 days past due 6,000 10% 61–90 days past due 5,000 12% Over 90 days past due 10,000 30% Total Accounts Receivable $141,000 a) Prepare the adjusting entry on December 31, 2010, to recognize bad debts expense. b) Assume the Allowance for doubtful account had a previous credit balance of $5,000, prepare the adjusting entry on December 31, 2010, to recognize bad debts expense. Problem 3: Brule Co. has at the end of the current year the following balance: Account Receivable $30,000 (DR) Net Credit Sales $180,000(CR) Allowance for Doubtful Accounts $2,000 (CR) Bad debts are estimated to be 10% of net credit sales. Prepare the entry to recognize bad debt expense Problem 4: In 2010, Lebron James Company has net credit sales of $923,795 for the year. It had a beginning accounts receivable balance of $38,275 and an ending balance accounts receivable of $35,989. Calculate Lebron James Company’s account receivable turnover and average collection period in days. (1 year is 365 days)

Paper For Above instruction

Introduction

Accounts receivable management is a crucial aspect of a company's financial operations. Proper estimation of uncollectible accounts and recording the corresponding bad debt expense impacts the accuracy of financial statements and reflects realistic evaluations of a company's assets. This paper examines four specific scenarios related to accounts receivable, aging schedules, bad debt estimations, and turnover calculations to demonstrate the fundamental accounting treatments and analytical processes involved.

Problem 2: Aging Schedule and Bad Debt Estimation for Integration Co.

The provided aging schedule for Integration Co.’s receivables enumerates the amounts overdue in various periods along with estimated uncollectibility percentages. To determine the bad debt expense, each category's receivable amount is multiplied by its respective percentage. Summing these amounts yields the total estimated uncollectible receivables.

Part a: Recognizing Bad Debts without Prior Allowance Balance

Using the data: not yet due $110,000 at 1%, 1–30 days past due $10,000 at 3%, 31–60 days at 10%, 61–90 days at 12%, and over 90 days at 30%, the calculation proceeds as follows:

• Not yet due: $110,000 * 1% = $1,100
• 1–30 days: $10,000 * 3% = $300
• 31–60 days: $6,000 * 10% = $600
• 61–90 days: $5,000 * 12% = $600
• Over 90 days: $10,000 * 30% = $3,000

Total estimated uncollectible = $1,100 + $300 + $600 + $600 + $3,000 = $5,200. The journal entry on December 31, 2010, would be:

Debit Bad Debts Expense $5,200
Credit Allowance for Doubtful Accounts $5,200

Part b: Adjusting for Existing Allowance Balance

Assuming the Allowance for Doubtful Accounts already has a $5,000 credit balance, the adjustment needed is the difference between the estimated uncollectibles ($5,200) and the existing balance ($5,000). Since the allowance already has a $5,000 credit, only an additional $200 needs to be recorded:

Debit Bad Debts Expense $200
Credit Allowance for Doubtful Accounts $200

Problem 3: Bad Debt Recognition for Brule Co.

Brule Co. reports net credit sales of $180,000 and an existing Allowance for Doubtful Accounts of $2,000 (credit balance). Bad debts are estimated at 10% of net credit sales, which is $18,000.

The journal entry to record the bad debt expense is:

Debit Bad Debts Expense $18,000
Credit Allowance for Doubtful Accounts $18,000

Since the allowance already has a $2,000 credit, the net increase to the allowance account is $18,000, which when added to the existing balance, results in a new balance of $20,000, aligning with the estimated bad debts.

Problem 4: Accounts Receivable Turnover and Collection Period for Lebron James Company

Given data: net credit sales of $923,795, beginning accounts receivable of $38,275, and ending accounts receivable of $35,989. The receivables turnover ratio is calculated as:

Accounts Receivable Turnover = Net Credit Sales / Average Accounts Receivable

Average Accounts Receivable = (Beginning + Ending) / 2 = ($38,275 + $35,989) / 2 = $37,132

Therefore, the receivable turnover ratio is:

Of $923,795 / $37,132 ≈ 24.86 times

The average collection period in days is computed as:

365 / 24.86 ≈ 14.69 days

This indicates that Lebron James Company's receivables are collected, on average, in approximately 15 days, reflecting efficient collections.

Conclusion

Accurate accounting for bad debts through aging schedules and estimations ensures transparency in financial reporting. Recognizing differences in allowance balances influences the adjustment entries, while analytical calculations like receivable turnover and collection periods provide insights into the company's liquidity and collection efficiency. Proper application of these accounting and analytical techniques supports sound financial management and stakeholder confidence.

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