Colorado Rocky Cookie Company offers credit terms to its customers. At the end o
ID: 2515183 • Letter: C
Question
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2018, accounts receivable totaled $685,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $44,000 at the beginning of 2018 and $27,000 in receivables were written off during the year as uncollectible. Also, $2,400 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year.
Required: 1. Prepare journal entries to record the write-off of receivables, the collection of $2,400 for previously written off receivables, and the year-end adjusting entry for bad debt expense. 2. How would accounts receivable be shown in the 2018 year-end balance sheet?
Explanation / Answer
1 Allowance for uncollectible accounts 27000 Accounts Receivable 27000 2 Accounts Receivable 2400 Allowance for uncollectible accounts 2400 3 Cash 2400 Accounts Receivable 2400 4 Bad debts expense 83350 =(685000*15%)-(44000-27000+2400) Allowance for uncollectible accounts 83350 Balance Sheet(Partial) Current Assets: Accounts Receivable (Net) 582250 =685000-(685000*15%)