| 12. | A
debit balance in the Allowance for Uncollectible Accounts means that the total
of the debits to
the account exceeded the credit balance created by the previous
period-end estimate. This
means that more receivables were written off than
expected (bad debts were underestimated).
A credit balance in the account
means that the total debits were less than the credit balance
created by
the previous period estimate, so fewer receivables were written off than expected
(bad debts were overestimated). The amount of the debit or credit balance is the
amount of
error in the previous estimate. | | 13. | Yes,
if the aging procedure is being used. No, if the percentage-of-sales procedure
is being used,
which targets a calculated balance for the Uncollectible Accounts
Expense. | | 14. | On
the balance sheet, total assets would be overstated because net accounts receivable
would be
overstated. Also, on the balance sheet, owner’s equity would
be overstated because net income is
overstated. On the income statement, net
income is overstated because uncollectible accounts
expense is understated. |
| 15. | If
sales returns and allowances are relatively stable every period, then they can
simply be
recorded as they occur. However, if returns and allowances are
unpredictable or it is likely that
there may be significant merchandise returns
from certain customers, sales returns and
allowances should be estimated
and recorded as a period-end adjustment in the same period in
which the related
sales were recorded. | | 16. | This
fraud was accomplished by debiting the Allowance for Uncollectible Accounts and
crediting a revenue or an expense account. Greater revenue or less expense
resulted in higher
net income.. | |
| |
 |
| Reinforcement
Problems |
| LG
26-1. |
| |
| | Total | Not
Yet
Due | Number
of Days Past Due | | 1–30 | 31–60 | 61–90 | Over
90 | Estimated
%
Uncollectible
Total
Estimated
Uncollectible | $ 47,650 | $ 32,000 | $ 7,050 | $ 3,900 | $ 3,150 | $ 1,550 |
| $ 2,867 | 1% | 4% | 10% | 30% | 60% |
| $ 320 | $ 282 | $ 390 | $ 945 | $ 930 |
|
| |
| a. $2,867
= ($320 + $282 + $390 + $945 + $930); rounded to $2,900 |
| b. |
| |
| |
| June 30 | Uncollectible
Accounts Expense | 2,530 | |
| | Allowance
for Uncollectible Accounts | |
2,530 |
|
|
|
| |
|
Learning
Goal 26, continued
| | | |
Learning
Goal 26: Record, Report, and Control Receivables |
S3 | |