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Accounts Receivable and Fixed Assets

Presented below is an aging schedule for Zillmann Company.
Number of Days Past Due
Customer Total Not
Yet Due 1-30 31-60 61-90 Over 90
Arndt $23,410 $11,220 $12,190
Blair 40,360 $40,360
Chase 61,890 17,720 7,060 $37,110
Drea 36,430 $36,430
Others 139,700 98,740 17,600 16,040 7,320
$301,790 $156,820 $35,880 $28,230 $37,110 $43,750
Estimated percentage
uncollectible 5% 8% 13% 25% 60%
Total estimated
bad debts $49,909 $7,841 $2,870 $3,670 $9,278 $26,250
At December 31, 2010, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $13,630.

Journalize the adjusting entry for bad debts at December 31, 2010.
Date Description/Account Debit Credit
Dec. 31

Post the adjusting entry for bad debts at December 31, 2010. Journalize and post to the allowance account the following events and transactions in the year 2011. (If answer is zero, please enter 0. Do not leave any fields blank.)
1. On March 31, a $1,150 customer balance originating in 2010 is judged uncollectible.
2. On May 31, a check for $1,150 is received from the customer whose account was written off as uncollectible on March 31.
Date Description Debit Credit
3/31/11

5/31/11

5/31/11

Accounts receivable

Bad Debts Expense
Date Explanation Ref. Debit Credit Balance
2010
Dec. 31 Adjusting

Allowance for Doubtful Accounts
Date Explanation Ref. Debit Credit Balance
2010
Dec. 31 Balance

31 Adjusting

2011
Mar. 31

May 31

At December 31, 2010, Jimenez Company reported the following as plant assets.
Land $3,732,000
Buildings $29,224,000
Less: Accumulated depreciation-buildings 10,642,000 18,582,000
Equipment 48,141,000
Less: Accumulated depreciation-equipment 5,148,000 42,993,000
Total plant assets $65,307,000
During 2011, the following selected cash transactions occurred.
April 1 Purchased land for $2,035,000.
May 1 Sold equipment that cost $687,000 when purchased on January 1, 2007. The equipment was sold for $397,100.
June 1 Sold land purchased on June 1, 2001, for $1,656,000. The land cost $402,000.
July 1 Purchased equipment for $2,270,000.
Dec. 31 Retired equipment that cost $509,000 when purchased on December 31, 2001. No salvage value was received.

Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 0 decimal places, e.g. 125.)
Date Account/Description Debit Credit
Apr. 1
$

$

May 1
$

$

(To record depreciation.)
May 1
$

$

$

$

(To record sale of equipment.)
June 1
$

$

$

July 1
$

$

Dec. 31
$

$

(To record depreciation.)
Dec. 31
$

$

(To record retirement of equipment.)

Record adjusting entries for depreciation for 2011.
Date Account/Description Debit Credit
Dec. 31
$

$

(To record building depreciation.)
Dec. 31
$

$

(To record equipment depreciation.)

Complete the plant assets section of Jimenez's balance sheet at December 31, 2011. (List in the same order as the partial balance sheet presented in the problem.)
JIMENEZ COMPANY
Balance Sheet (Partial)
December 31, 2011
Plant Assets

$

$

Less:

Less:
Total plant assets $

Journalize the adjusting entry for bad debts on December 31, 2011, assuming that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $890 and the aging schedule indicates that total estimated bad debts will be $30,800.
Date Description Debit Credit
12/31/11

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Solution Preview

Problem #1: Because we are using a balance sheet approach (i.e., we are adjusting the Allowance for Doubtful accounts for amounts in the Accounts Receivable account), we bring the Allowance account into alignment with the aging schedule by recognizing bad debt expense for the adjustment amount. Thus, we want the Allowance for Doubtful Accounts to be $49,909 but is only $13,630; thus, we need to increase it by $36,279. The entry is thus,

December 31 Bad Debts Expense 36,279
Allowance for Doubtful Accounts 36,279

Under the Allowance Method, only estimates are recorded to Bade Debts Expense. Actual write-offs are reclassified from Accounts Receivable to the Allowance for Doubtful Accounts. (Indirectly, they hit the Bad Debts expense because the Allowance for Doubtful Accounts balance is decreased by the write-off and must be adjusted to the aging schedule.) Likewise, recoveries of actual write-offs are reversals of the write-off process. Thus,

March 31 Allowance for Doubtful Accounts 1,150
Accounts Receivable 1,150

May 31 Accounts Receivable 1,150
Allowance for Doubtful Accounts 1,150

May 31 Cash 1,150
Accounts Receivable 1,150

Thus,

Bad Debts Expense
Date Explanation Ref. Debit Credit Balance
2010
Dec. 31 Adjusting ...

Solution Summary

Presented below is an aging schedule for Zillmann Company.
Number of Days Past Due
Customer Total Not
Yet Due 1-30 31-60 61-90 Over 90
Arndt $23,410 $11,220 $12,190
Blair 40,360 $40,360
Chase 61,890 17,720 7,060 $37,110
Drea 36,430 $36,430
Others 139,700 98,740 17,600 16,040 7,320
$301,790 $156,820 $35,880 $28,230 $37,110 $43,750
Estimated percentage
uncollectible 5% 8% 13% 25% 60%
Total estimated
bad debts $49,909 $7,841 $2,870 $3,670 $9,278 $26,250
At December 31, 2010, the unadjusted balance in Allowance for Doubtful Accounts is a credit of $13,630.

Journalize the adjusting entry for bad debts at December 31, 2010.
Date Description/Account Debit Credit
Dec. 31

Post the adjusting entry for bad debts at December 31, 2010. Journalize and post to the allowance account the following events and transactions in the year 2011. (If answer is zero, please enter 0. Do not leave any fields blank.)
1. On March 31, a $1,150 customer balance originating in 2010 is judged uncollectible.
2. On May 31, a check for $1,150 is received from the customer whose account was written off as uncollectible on March 31.
Date Description Debit Credit
3/31/11

5/31/11

5/31/11

Accounts receivable

Bad Debts Expense
Date Explanation Ref. Debit Credit Balance
2010
Dec. 31 Adjusting

Allowance for Doubtful Accounts
Date Explanation Ref. Debit Credit Balance
2010
Dec. 31 Balance

31 Adjusting

2011
Mar. 31

May 31

At December 31, 2010, Jimenez Company reported the following as plant assets.
Land $3,732,000
Buildings $29,224,000
Less: Accumulated depreciation-buildings 10,642,000 18,582,000
Equipment 48,141,000
Less: Accumulated depreciation-equipment 5,148,000 42,993,000
Total plant assets $65,307,000
During 2011, the following selected cash transactions occurred.
April 1 Purchased land for $2,035,000.
May 1 Sold equipment that cost $687,000 when purchased on January 1, 2007. The equipment was sold for $397,100.
June 1 Sold land purchased on June 1, 2001, for $1,656,000. The land cost $402,000.
July 1 Purchased equipment for $2,270,000.
Dec. 31 Retired equipment that cost $509,000 when purchased on December 31, 2001. No salvage value was received.

Journalize the above transactions. The company uses straight-line depreciation for buildings and equipment. The buildings are estimated to have a 50-year life and no salvage value. The equipment is estimated to have a 10-year useful life and no salvage value. Update depreciation on assets disposed of at the time of sale or retirement. (For multiple debit/credit entries, list amounts from largest to smallest eg 10, 5, 3, 2. Round answers to 0 decimal places, e.g. 125.)
Date Account/Description Debit Credit
Apr. 1
$

$

May 1
$

$

(To record depreciation.)
May 1
$

$

$

$

(To record sale of equipment.)
June 1
$

$

$

July 1
$

$

Dec. 31
$

$

(To record depreciation.)
Dec. 31
$

$

(To record retirement of equipment.)

Record adjusting entries for depreciation for 2011.
Date Account/Description Debit Credit
Dec. 31
$

$

(To record building depreciation.)
Dec. 31
$

$

(To record equipment depreciation.)

Complete the plant assets section of Jimenez's balance sheet at December 31, 2011. (List in the same order as the partial balance sheet presented in the problem.)
JIMENEZ COMPANY
Balance Sheet (Partial)
December 31, 2011
Plant Assets

$

$

Less:

Less:
Total plant assets $

Journalize the adjusting entry for bad debts on December 31, 2011, assuming that the unadjusted balance in Allowance for Doubtful Accounts is a debit of $890 and the aging schedule indicates that total estimated bad debts will be $30,800.
Date Description Debit Credit
12/31/11

$2.19