The following selected accounts are for Keystone, Inc., a name brand shoe wholes
ID: 2406000 • Letter: T
Question
The following selected accounts are for Keystone, Inc., a name brand shoe wholesale store, as of 2009 December 31. Prior to closing the accounts and making allowance for uncollectible accounts entries, the $ 5,000 account of Morgan Company is to be written off (this was a credit sale of 2009 February 12).
Prepare journal entries to record all of these transactions and the uncollectible accounts expense for the period. Assume the estimated expense is 2 per cent of net sales.
Give the entry to record the estimated expense for the period if the allowance account is to be adjusted to 5 per cent of outstanding receivables instead of as in (a).
Accounts receivable $ 360,000 Allowance for uncollectible accounts (credit) 6,000 Sales 1,680,000 Sales returns and allowances 30,000Explanation / Answer
Answers
Accounts title
Debit
Credit
Allowance for Uncollectible accounts
$ 5,000.00
Accounts receivables
$ 5,000.00
(account written off)
---This entry will be same under both methods.
Sales
$ 1,680,000.00
Sales returns
$ (30,000.00 )
Net Sales
$ 1,650,000.00
2% of net sales
$ 33,000.00
Accounts title
Debit
Credit
Bad Debt (Uncollectible) Expenses
$ 33,000.00
Allowance for Uncollectible accounts
$ 33,000.00
(expense estimated as per 2% of net sales)
Accounts receivables
$ 360,000.00
Written Off
$ (5,000.00)
Outstanding Accounts receivables
$ 355,000.00
5% of above = Adjusted balance of Allowance account
$ 17,750.00
Beginning Allowance account balance
$ 6,000.00
Account written off
$ (5,000.00)
Unadjusted balance
$ 1,000.00
Adjusted balance required
$ 17,750.00
amount of Uncollectible expenses
$ 16,750.00
Accounts title
Debit
Credit
Bad Debt (Uncollectible) Expenses
$ 16,750.00
Allowance for Uncollectible accounts
$ 16,750.00
(expense estimated as per % of account receivables)
Accounts title
Debit
Credit
Allowance for Uncollectible accounts
$ 5,000.00
Accounts receivables
$ 5,000.00
(account written off)