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Molodets [167]
3 years ago
6

Castle Company provides estimates for its uncollectible accounts. The allowance for uncollectible accounts had a credit balance

of $17,280 at the beginning of 2021 and a $22,410 credit balance at the end of 2021 (after adjusting entries). If the direct write-off method had been used to account for uncollectible accounts (bad debt expense equals actual write-offs), the income statement for 2021 would have included bad debt expense of $17,100 and revenue of $2,200 from the collection of previously written off bad debts.
Required: Determine bad debt expense for 2018 according to the allowance method.
Business
1 answer:
Leni [432]3 years ago
5 0

Answer:

Dr Bad debt expense 20,030

     Cr Allowance for doubtful accounts 20,030

Explanation:

first we must determine the net amount of bad debt under direct write off = $17,100 - $2,200 = $14,900

now the increase in the allowance account during 2021 = $22,410 - $17,280 = $5,130

The journal entries following allowance method:

bad debts written off:

Dr Allowance for doubtful accounts 17,100

     Cr Accounts receivable 17,100

bad debts recovered:

Dr Accounts receivable 2,200

     Cr Allowance for doubtful accounts 2,200

Dr Cash 2,200

     Cr Accounts receivable 2,200

Adjustments following allowance method:

recording bad debt expenses (net amount of bad debt + increase in allowance for bad debt account = $14,900 + $5,130)

Dr Bad debt expense 20,030

     Cr Allowance for doubtful accounts 20,030

Now we can check:

$17,280 (beginning balance) - $17,100 write offs + $2,200 recoveries + $20,030 bad debt expense = $22,410 which is the ending balance of allowance for doubtful accounts

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2 years ago
Arjen owns investment A and 1 bond B. The total value of his holdings is 1,529 dollars. Investment A is expected to pay annual c
zloy xaker [14]

Answer:

In order to find the present value of the bond we have to calculate the present value of investment A and subtract is from 1529. We can find the present value of A by discounting all its cash flows.

As the first cash flow is received today and the last will be received 3 years form now there will be a total of 4 cash flows

1) 218.19 (Will not be discounted as we are receiving it today in the present)

2) 218.19/1.0987 (Discount by 1 year as cash will be received in 1 year)

3) 218.19/1.0987^2 (Discount by 2 years as cash will be received in 2 years)

4) 218.19/ 1.0987^3 (Discount by 3 years as cash will be received in 3 years)

= 218.19 + 198.58 + 180.74+ 164.51 = 762.02

PV of Bond = 1529-762.09= 766.91

Semi annual coupons mean 2 payments a year. Bond B matures in 23 years which means a total of 46 payments (23*2). N=46. A coupon rate of 6.4 percent means that the bond pays $64 (0.064*1000) each year. $64 divided by 2 is 32 which is the amount of each semi annual payment Arjen receives. Pv= 766.91 FV = 1000

In a financial calculator put

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N= 46

FV=1000

PMT= 32

and compute I

I is 4.38 and we will multiply it by 2 because the payments are semi annual. So we will get an I of 8.76

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Explanation:

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3 years ago
Private placements can be advantageous, compared to public issue, because: I. Private placements are cheaper to market than publ
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Answer:

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Answer:

Retained earnings on the December 31, 2019: $253,000

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Ending balance in retained earnings is calculated by using following formula:

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Grizzly Company had Retained Earnings at December 31, 2018 of $210,000.  Beginning balance in retained earnings at January 01, 2019 is $210,000

Net income = Revenues - Expenses = $410,000 - $355,000 = $55,000

Ending balance in retained earnings = $210,000 + $55,000 - $12,000 = $253,000

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Answer:

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