On January 1, 2018, the general ledger of a company includes the following accou

ID: 2401895 • Letter: O

Question

On January 1, 2018, the general ledger of a company includes the following account balances:

The company accounts for all inventory transactions using the perpetual FIFO method. Purchases and sales of inventory are recorded using the gross method for cash discounts. The $42,000 beginning balance of inventory consists of 350 units, each costing $120. During January 2018, the company had the following transactions:

During January 2018, the following transactions occur:

The following information is available on January 31, 2018.

Of the remaining accounts receivable, the company estimates that 10% will not be collected.

Accrued interest income on notes receivable for January.

Accrued interest expense on notes payable for January.

Accrued income taxes at the end of January for $5,100.

Depreciation on the building, $2,100.

I need help with the following:

The journal entry: Of the remaining accounts receivable, the company estimates that 10% will not be collected.

Accounts Debit Credit Cash $ 71,000 Accounts Receivable 41,000 Allowance for Uncollectible Accounts $ 5,000 Inventory 31,000 Building 71,000 Accumulated Depreciation 11,000 Land 201,000 Accounts Payable 21,000 Notes Payable (9%, due in 3 years) 34,000 Common Stock 101,000 Retained Earnings 243,000 Totals $ 415,000 $ 415,000

Explanation / Answer

Answers

Working #1

Transaction

Accounts receivables

Beginning Balance

$ 41,000.00

Jan-15

Sold goods on account [3400 x $150]

$ 510,000.00

Jan-17

Sales Return (300 x $150)

$ (45,000.00)

Jan-20

Received cash (37000 + [28002 x $150])

$ (457,000.00)

Jan-21

Accounts written off (2017: 41,000 - 37,000 cash received)

$ (4,000.00)

Remaining Accounts receivables on Jan 31, 2018

$ 45,000.00

Working #2

A [calculated in Working #1]

Remaining Accounts receivables on Jan 31, 2018

$ 45,000.00

B = A x 10% uncollectible

Adjusted allowance for Uncollectible balance should be

$ 4,500.00

Working #3

A [given in Trial Balance]

Beginning balance of Allowance account

$ 5,000.00

Accounts written off on Jan 21

$ 4,000.00

C = A - B

Unadjusted allowance for uncollectible account balance

$ 1,000.00

D [calculated in Working #2]

Adjusted balance required

$ 4,500.00

E = D - C

Bad Debt (uncollectible) Expense for the period

$ 3,500.00

Date

Accounts title

Debit

Credit

31-Jan-18

Bad Debt (Uncollectible) Expense

$ 3,500.00

Allowance for Uncollectible Accounts