1. Accounts receivable
Chapter 16

2. (a) Dealing with deadbeats
Allowance method
Adjusting entry for estimated bad debts Bad Debt Expense 1000
Allow for Doubtful Accts 1000
Write off accounts as they occur Allowance for Doubtful Accts 1000
Accts Rec / J. Smith

3. (b) Estimating uncollectibles
Percentage of sales method
Using past information, determine how much will be uncollectible
How much was uncollectible / total credit sales
(example: $3,000 uncollectible / $300,000 in total credit sales = 1% uncollectible)
Percentage of receivables method
Total amount of all customer balances * estimated uncollectible percentage
(example: A/R general ledger balance $400,000 * 1% estimated uncollectible = $4,000)

4. (c) Aging the receivables
Total credit sales in accounts receivable account - $400,000
0-30 days (not late) – 1% uncollectible $200, $2,000
31-60 days late – 10% uncollectible $100,000 $10,000
61-90 days late – 25% uncollectible $50,000 $12,500
Over 90 days late – 80% uncollectible $50,000 $40,000
Total estimated uncollectible $64,500

5. (d) What if a deadbeat pays?
Reinstate the account that was previously written off
Accounts receivable / J. Smith 300
Allowance for doubtful accounts
Then record the collection
Cash
Accounts receivable / J. Smith

6. (E) Direct write-off method
Customer doesn’t pay, you give up
Bad debt expense 500
Accounts Receivable / J. Jones
Then reinstate the account (same fiscal period)
Accounts receivable / J. Jones 500
Bad debt expense
Then record customer payment
Cash
Accounts receivable / J. Jones

7. (f) Direct write-off method
Customer doesn’t pay, you give up
Bad debt expense 500
Accounts Receivable / J. Jones
Then reinstate the account (different fiscal period)
Accounts receivable / J. Jones 500
Uncollectible accounts recovered
Then record customer payment
Cash
Accounts receivable / J. Jones

8. assignments Read pages 625-641 Exercises 1, 2, 3, 4, 5
Problems 8A, 9A, 10A
Pages 645 – 646