Prepare a T-account for the Allowance for Doubtful Accounts and enter into it the 2014 amounts from the above schedule. The balance at the beginning of each year in the Allowance for Doubtful Accounts is a credit balance. 1-b. Write the T-account in equation format to prove the above items account for the changes in the account. 2. Record summary journal entries for 2015 related to (a) estimating Bad Debt Expense and (b) writing off specific customer account balances. 3. Supply the missing information for 2016. 4. If TravelToday had written off an additional $37 of Accounts Receivable during 2016, by how much would Net Receivables have decreased? How much would Net Income have decreased?

Explanation:

1a) Allowance for doubtful Accounts

Particulars                                      Debit            Credit                 Balance

Beg. Bal.                                                                              $12,700.00

Bad debts expense                                   $1,000.0           $13,700.00

Write offs                               $5,500.00                     $8,200.00

End. Bal                                                                                 $8,200.00

b)Beginning Balance + Increase for bad debts expense - Decrease for write offs= Ending Balance

$12,700.00 + $1,000.00 - $5,500.00= $8,200.00

2) Journal Entries - Travel today Inc.

TransactionParticulars                                 Debit                 Credit

a            Bad debts expense Dr             $5,700.00  

             To Allowance for doubtful accounts                     $5,700.00

        (To record bad debts provision for 2015)  

bAllowance for doubtful accounts Dr       $3,700.00  

      To Accounts receivables                                            $3,700.00

        (To write off receivables)

3)

Allowance for doubtful accounts 2016

Beginning Balance + Increase for bad debts expense - Decrease for write offs= Ending Balance

$9,200.00 + $4,100.00 - $12,000.00 = $1,300.00

4)  On writing off additional accounts receivables by $37, there will be no impact on net accounts receivables and income statement as balance in accounts receivables and allowance for doubtful accounts decreased by $37, therefore net receivable and net income will remains the same.

Net receivables - 0

Net Income - 0

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