Problem 7-4B Accounts receivable transactions and bad debts adjustments C1 P2 Sh
ID: 2463179 • Letter: P
Question
Problem 7-4B Accounts receivable transactions and bad debts adjustments C1 P2 Sherman Co. began operations on January 1, 2014, and completed several transactions during 2014 and 2015 that involved sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows.
2014
a. Sold $685,350 of merchandise (that had cost $500,000) on credit, terms n/30.
b. Received $482,300 cash in payment of accounts receivable.
c. Wrote off $9,350 of uncollectible accounts receivable.
d. In adjusting the accounts on December 31, the company estimated that 1% of accounts receivable will be uncollectible.
2015
e.Sold $870,220 of merchandise (that had cost $650,000) on credit, terms n/30.
f. Received $990,800 cash in payment of accounts receivable.
g.Wrote off $11,090 of uncollectible accounts receivable.
h.In adjusting the accounts on December 31, the company estimated that 1% of accounts receivable will be uncollectible.
Required Prepare journal entries to record Sherman's 2014 and 2015 summarized transactions and its year-end adjusting entry to record bad debts expense. (The company uses the perpetual inventory system and it applies the allowance method for its accounts receivable. Round amounts to the nearest dollar.)
Check(d) Dr. Bad Debts Expense $11,287 (h) Dr. Bad Debts Expense $9,773
Explanation / Answer
Journal Entries 2014 Account Receivable Ledger Sr.No. Account title Debit Credit 2014 In $ In $ To balance b/d - 1 Account Receivable 685350 To sales 6,85,350 By Cash 4,82,300 Sales 685350 By Allowance for Doudtful account 9,350 By balance c/f 1,93,700 2 Cash 482300 6,85,350 6,85,350 Account Receivable 482300 Uncollectible accounts as on December 31,2014 = 1% of $193700 = $1937 3 Allowance for Doubtful account 9350 Account Receivable 9350 Account Receivable Ledger 2015 4 Bad debt 11287 To balance b/d 1,93,700 Allowance for Doubtful account 11287 To sales 8,70,220 By Cash 9,90,800 By Allowance for Doudtful account 11,090 Journal Entries 2015 By balance c/f 62,030 Sr.No. Account title Debit Credit 10,63,920 10,63,920 In $ In $ 1 Account Receivable 870220 Uncollectible accounts as on December 31,2014 = 1% of $73120 = $620 Sales 870220 Allowance for Doubtful accounts 2 Cash 990800 2014 Account Receivable 990800 To Accounts Receivable 9,350 By balance b/d - By Bad debt 11,287 3 Allowance for Doubtful account 11090 To balance c/f 1,937 Account Receivable 11090 11,287 11,287 4 Bad debt 9773 Allowance for Doubtful account 9773 Allowance for Doubtful accounts 2015 To Accounts Receivable 11,090 By balance b/d 1,937 By Bad debt 9,773 To balance c/f 620 11,710 11,710