ACC 537 Week 2 Textbook Problems P10 2 Lobo Corporation ( Team Paper and Solution )
P7-4 ( Bad-Debt Reporting ) From inception of operations to December 31 , 2014 , Fortner Corporation provided for uncollectible accounts receivable under the allowance method . Provisions were made monthly at 2 % of credit sales , bad debts written off were charged to the allowance account ; recoveries of bad debts previously written off were credited to the allowance account , and no year-end adjustments to the allowance account were made . Fortner ’ s usual credit terms are net 30 days . The balance in Allowance for Doubtful Accounts was $ 130,000 at January 1 , 2014 . During 2014 , credit sales totaled $ 9,000,000 , interim provisions for doubtful accounts were made at 2 % of credit sales , $ 90,000 of bad debts were written off , and recoveries of accounts previously written off amounted to $ 15,000 . Fortner installed a computer system in November 2014 , and an aging of accounts receivable was prepared for the first time as of December 31 , 2014 . A summary of the aging is as follows . Based on the review of collectability of the account balances in the “ prior to 1 / 1 / 14 ” aging category , additional receivables totaling $ 60,000 were written off as of December 31 , 2014 . The 80 % uncollectible estimate applies to the remaining $ 90,000 in the category . Effective with the year ended December 31 , 2014 , Fortner adopted a different method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable .
Prepare a schedule analyzing the changes in Allowance for Doubtful Accounts for the year ended December 31 , 2014 . Show supporting computations in good form . ( Hint : In computing the 12 / 31 / 14 allowance , subtract the $ 60,000 write-off .)
Prepare the journal entry for the year-end adjustment to Allowance for Doubtful Accounts balance as of December 31 , 2014 .
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ACC 537 Week 2 Textbook Problems P10 2 Lobo Corporation ( Team Paper and Solution )