College Accounting: Chapter 16 Mastery Problem - Sam and Robert are identical twins

College Accounting

Chapter 16 Mastery Problem
Sam and Robert are identical twins. They opened identical businesses and experienced identical twins. They opened identical businesses and experienced identical transactions. However, they decided to estimate uncollectible accounts in different ways. Sam elected to use the percentage of sales method, and Robert elected to use the percentage of receivables method. Listed below are the beginning balances of Cash, Accounts Receivable, and Allowance for Bad Debts [Items (a)-(c)], and summary transactions that occurred during the year [items (d)-(g)] for both businesses. Remember both businesses experiences the same events: credit sales, collections of receivables, and write-offs. The only difference between the businesses is the method of estimating uncollectible accounts.
Sam Robert
a) Balance of Cash, January 1, 20-- 300,000 300,000
b) Balance of Accounts Receivable, January 1 50,000 50,000
c) Balance of Allowance for Bad Debts, January 1 5,000 5,000
d) Sales on account during 20-- 550,000 550,000
e) Collection on account during 20-- 530,000 530,000
f) Uncollectible accounts written off during 20-- 4,500 4,500
g) Collections made on accounts written off during 20-- 500 500

Required:
1. Enter items (a) through (c) in two sets of general ledger accounts: one for Sam and one for Robert.
For Sam:
2. Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Sam.
3. Post the entries to a general ledger for Sam, using the following accounts and numbers.
Cash 101
Accounts Receivable 122
Sales 401
4. Sam estimates that 1% of all sales on account will be uncollectible. Calculate the estimated bad debt expense and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--.
5. Compute the net realizable value of Sam's accounts receivable on December 31, 20--.
For Robert:
6. Prepare entries in a general journal (page 4) for summary transactions (d) through (g) for Robert.
7. Post the entries to a general ledger for Sam, using the same accounts and numbers as were used for Sam.
8. Robert bases the estimate of uncollectible accounts on an aging schedule of accounts receivable. Using the following information, compute the estimated uncollectible amounts and make the appropriate adjusting entry in a general journal. Post the entry to the general ledger accounts on December 31, 20--.
Customer Invoice Dates and Amounts for Unpaid Invoices
Beets, D. 10/7 2,300 11/15 1,200 12/18 8,500
Cook, L. 6/1 1,200 8/15 2,500
Hylton, D. 9/23 4,300 10/22 2,500 12/23 2,800
Martin, D. 10/15 5,400 11/12 3,200 12/15 1,500
Stokes, D. 9/9 200 12/15 9,500
Taylor, T. 11/20 400 12/10 1,400
Thomas, O. 12/2 5,500
Tower, R. 12/15 2,300
Williams, G. 11/18 2,800 12/8 8,000
All sales are billed n/30. The following aging chart is used to estimate the uncollectible3s using the percentage of receivables method:
Age Interval Estimated Percent Uncollectible
Not yet due 2%
1-30 days 5%
31-60 days 10%
61-90 days 25%
91-120 days 50%
Over 120 days 80%
9. Compute the net realizable value of Robert's accounts receivable on December 31, 20--.