TravelToday, Inc., disclosed the following rounded amounts (in thousands) concerning the Allowance for Doubtful Accounts on its Form 10-K annual report. Allowance for Doubtful Accounts (dollars in thousands) Beginning Increases for Decreases for Ending Bad Debt Expense 4,000 4,600 Year Balance Write-Offs Balance 9,000 8,000 12,500 1,200 9,000 8,000 2016 $ $ 3,600 5,400 2015 2014 900 Required: 1-a. Prepare a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance. 1-b. Write the T-account in equation format to prove the above items account for the changes in the account. 2. Record summary journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances. 3. Supply the missing information for 2016. 4. If TravelToday had written off an additional $30 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased?
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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Required 1-a
Create a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance. (Enter your answers in thousands.)
Allowance for Doubtful Accounts
Beg. Bal. [ ][ ][ ]
[ ][ ][ ][ ]
[ ][ ][ ][ ]
[ ][ ][ ][ ]
End. Bal. [ ][ ][ ]
Required 1-b
Write the T-
Beginning Balance + - = Ending Balance
[ ] + [ ] - [ ] = $[ ]
Required 2
Record summary journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances. (If no entry is required for a transaction/event, select "No
Record the
Transaction General Journal Debit Credit
a [ ] [ ] [ ]
Record the adjusting entry in 2015 for the write-off of specific customer balances. (Note: Enter debits before credits.)
Transaction General Journal Debit Credit
b [ ] [ ] [ ]
Required 3
Supply the missing information for 2016. (Enter your answers in thousands.)
Allowance Balance at Additions Charged Write Balance
for Doubtful Beginning to Bad Debt Offs at End
Accounts of Year Expense of Year
2016 9,000 [ ] 4,000 [ ] [ ] = 1,200
Required 4
If TravelToday had written off an additional $30 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased? (Enter your answers in thousands.)
Net Receivables [ ]
Net Income [ ]
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