Woodlawn Case Part 3

Case Part 3 name for the CFO There be several necessary journal entries that have been made to adjust the maladjusted trial balance. For Allowance for doubtful accounts 1. In 2009, $ 58,621. 84 was directly written off to bad debt set down reflecting the hails owed by customers who had gone bankrupt during the year. The journal opening would have been get downed as Dr poorly debt disbursal 58,621. 84 Cr Account receivable 58,621. 84 To prove the uncollectable amount due to customer bankruptcy.The conditions of exploitation the direct write down method is either for companies in their first year of operations, or for whom uncollectible accounts are immaterial. Woodlawn does not fit either case. Therefore, it is wrong for Woodlawn to use the direct set down method. The following journal entry is what should have been dischargeed, Dr Allowance for doubtful account 58,621. 84 Cr Account receivable 58,621. 84 To record the uncollectible amount due to customer bankruptcy. The refore, the following adjusted entry is made to correct the write-off of $58,621. 4. Dr. Allowance for doubtful account 58,621. 84 Cr. Bad debt expense 58,621. 84 To record the correction of actus reus made in write-off. 2. Historically, bad debt has averaged out to approximately 1. 5% of revenues. Therefore, we port curiosity that bad debt in 2009 would be 1. 5% of revenue. The journal entry is the following, Dr. Bad debt expense 20,279. 28* Cr. Allowance for doubtful account20,279. 28 To record the estimated uncollectible amount. *(Calculation 1. 5%*$1,351,951. 83=20,279. 28) 3. As Tim mentioned that Woodlawn has received $93,256. 1 thats everyplace 90 geezerhood ago due since August 31, 2010. There is no journal entry needed to be done, since it had past the fiscal year end. 4. Woodlawn has not received $69,942. 13 from Erie Limited thats past due over 90 days. But since Erie always paid its bills, there is no need to write-off Erie Limited to AFDA. No adjusted entry needed. 5. Calculation of gist amount of Allowance for doubtful accounts (AFDA). Assumption for calculating AFDA we estimate the percentage for AFDA in 2010 to be 11%. This estimation is found on 1.Based on the information Michael provided, the worsened of the recession is over and current economic conditions have improved since last month. 2. Customers are paying long-playing then previous years due to bad economic conditions. Therefore the percentage of AFDA should fall in a range among percentages of 2008-2009, which is 4. 9%-13. 1%. We estimate 11% to be a better choice. The total amount of AFDA ending balance is 11%* $374,692. 53=$41,216. 18 In order to calculate the AFDA amount needed to adjust, we need the AFDA opening balance which is $35,000 from trial balance, the correction of error made in write-off $58,621. 4. $ 58,621. 84 $35,000 ? $41,216. 18 ADFA ? = $41,216. 18+$58,621. 84-$35,000=$64,838. 02 The adjusted entry is made based on the previous information, Dr Bad debt exp ense 64,838. 02 Cr Allowance for doubtful accounts 64,838. 02 To record the adjustment made for Allowance for doubtful accounts at the fiscal year end. For Insurance Calculation of the adjustment of prepaid expenses at the year end postpaid insurance for the beginning of September 1, 2009 $9,300 Insurance from Fife InsurancePolicy Period 2010/05/20-2011/05/20 Amount $12,885. 48 For the period beginning at Sept, 1 2009, to year end at August 31,2010 is 103 days in total, Total Insurance expense = $12,885. 48* 103/365=$3,636. 18 Balance required at year end=$12,885. 48-$3,636. 18=$9,249. 30 Prepaid expense adjustments =$9,300-$9,249. 30=$50. 70 The adjusted entry is made based on the previous calculation, Dr Insurance expense $50. 70 Cr Prepaid insurance$50. 70 To record the adjustment of prepaid insurance