Grass Frog Company sells merchandise only on credit. For the year ended December 31, 2018, the following data are available: Sales (all on credit) $2,100,000
Accounts Receivable, January 1, 2018 305,000
Allowance for doubtful accounts,
January 1, 2018 (credit) 25,000
Cash collections during 2018 1,980,000
Accounts written off as uncollected
(default) during 2018 15,000
1. Determine the balance of Accounts Receivable at December 31, 2018.
2. Assume that the company estimates bad debts at 4% of credit sales. What amount will the company record as bad debt expense for 2018?
3. What journal entry Grass Frog prepare to record bad debt expense for 2018 (related to part 2)?
4. Now assume the company estimates bad debts based on the aging method. Estimate the ending balance in the allowance for doubtful accounts at December 31, 2018 using the information below:
AGE CLASS % UNCOLLECTIBLE AMOUNT
Not Past Due 1% $220,000
1-30 Days Past Due 5% $110,000
31-60 Days Past Due 10% $40,000
61-90 Days Past Due 25% $30,000
Over 90 Days Past Due 50% $10,000
1. What journal entry would Grass Frog prepare to record bad debt expense for 2018 (related to part 4)?
2. What is the net realizable value of the receivables to be reported on the balance sheet at year-end (assuming aging method was used by Grass Frog)?

Grass Frog Company

1. The balance of Accounts Receivable at December 31, 2018 is:

= $410,000.

2. The amount that the company will record as bad debt expense for 2018 is:

= $74,000.

3. Journal Entry to record the bad debt expense for 2018:

Debit Bad Debt Expense $74,000

Credit Allowance for Doubtful Accounts $74,000

To record the bad debt expense for the year.

4. The ending balance in the allowance for doubtful accounts at December 31, 2018 is:

= $24,200

a. Journal Entry to record bad debt expense:

Debit Bad Debt Expense $14,200

Credit Allowance for Doubtful Accounts $14,200

To record the bad debt expense for the year.

b. The net realizable value of the receivables to be reported on the balance sheet at year-end (assuming aging method was used by Grass Frog) is:

Accounts receivable balance     $410,000

Allowance for doubtful accounts (24,200)

Net realizable value =                $385,800

Explanation:

a) Data and Calculations:

December 31, 2018:

Accounts Receivable

January 1, 2018                           $305,000

Sales (all on credit)                     2,100,000

Cash collections during 2018   (1,980,000)

Accounts written off during 2018  (15,000)

Dec. 31, 2018 balance                 $410,000

Allowance for doubtful accounts,

Accounts written off during 2018  $15,000

December 31, 2018 (4%)                  84,000

January 1, 2018 (credit)                  (25,000)

Bad Debts Expense                        74,000

AGE ANALYSIS:

AGE CLASS                           %      UNCOLLECTIBLE    ALLOWANCE

                                                              AMOUNT

Not Past Due                       1%             $220,000            $2,200

1-30 Days Past Due           5%               $110,000               5,500

31-60 Days Past Due       10%                $40,000              4,000

61-90 Days Past Due      25%                $30,000              7,500

Over 90 Days Past Due 50%                 $10,000              5,000

Total                                                    $410,0000         $24,200

Accounts written off during 2018  $15,000

December 31, 2018                          24,200

January 1, 2018 (credit)                  (25,000)

Bad Debts Expense                         14,200

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know