From Inception of Operations to December 31,2013,Centaur Corporation Provided for Uncollectible

question 50

Essay

From inception of operations to December 31,2013,Centaur Corporation provided for uncollectible accounts receivable under the allowance method: Provisions were made monthly at 2 percent 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.Centaur's usual credit terms are net 30 days.
The credit balance in the allowance for doubtful accounts was $260,000 at January 1,2014.During 2014,credit sales totaled $18,000,000,interim provisions for doubtful accounts were made at 2 percent of credit sales,$180,000 of bad debts were written off,and recoveries of accounts previously written off amounted to $30,000.Centaur 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 collectibility of the account balances in the "prior to January 1,2014" aging category,additional receivables totaling $120,000 were written off as of December 31,2014.Effective with the year ended December 31,2014,Centaur adopted a new accounting method for estimating the allowance for doubtful accounts at the amount indicated by the year-end aging analysis of accounts receivable.
(1)Prepare a schedule analyzing the changes in the allowance for doubtful accounts for the year ended December 31,2014.Show supporting computations in good form.
(2)Prepare the journal entry for the year-end adjustment to the allowance for doubtful accounts balance as of December 31,2014.

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Definitions:

Precausal Thinking

A type of logic in young children characterized by a lack of understanding of cause-and-effect relationships.

Egocentric Thinking

A cognitive perspective where an individual has difficulty understanding or acknowledging viewpoints other than their own.

Sensorimotor Stage

The first of Piaget's stages of cognitive development, where infants from birth to approximately two years old learn about the world through their senses and actions.

Operations

Flexible, reversible mental manipulations of objects, in which objects can be mentally transformed and then returned to their original states.