Question
Your company prepares financial statements only once a year. In accounting for uncollectible accounts it uses the allowance method. For the most recent year give general journal entries for the following. Beginning of the year balances:(No journal entries needed for beg. Balances) Accounts Receivable 256,200 Allowance for uncollectible accounts 6,250 Uncollectible Accounts Expense - 1 Sales for the year were 1,585,000. 70% of sales are credit sales 2 Collection on credit sales for the year were 1,070,000 3 Wrote off 10500 of specific customer accounts 4a At year end estimate uncollectible accts to be 1.75% of credit sales 4b Instead of 4a, the company ages it receivables and estimated 7500 as uncollectible
Explanation / Answer
Hi,
Please find the answer as follows:
Part A:
Accounts Receivables (1585000*70%) Dr. 1109500
Cash Dr. 475500
Sales Cr. 1585000
Part B:
Cash Dr. 1070000
Accounts Receivables Cr. 1070000
Part C:
Bad Debts Expense Dr. 10500
Accounts Receivables Cr. 10500
Part D:
Bad Debts (1109500*1.75%) Dr. 1916.25
Provision/Allowance for Bad Debts Cr. 1916.25
Part E:
Bad Debts Dr. 7500
Provision/Allowance for Bad Debts Cr. 7500
Thanks.