On January 1, 20X1, Mechanical Engineers, Inc. had an accounts receivable balanc
ID: 2516814 • Letter: O
Question
On January 1, 20X1, Mechanical Engineers, Inc. had an accounts receivable balance of $506,000 and a credit balance in the allowance for uncollectible accounts of $45,000. During January, the company had credit sales of $2,150,000, collections on credit sales of $1,950,000, and write offs of uncollectible accounts receivable totaling $41,000. All of the company's sales are credit sales.
a) Prepare journal entries to record the credit sales, cash collections, and accounts receivable write offs for January.
b) Mechanical Engineers, Inc. estimates bad debt expense at 2.5% of credit sales. Prepare journal entry for bad debt expense.
c) Show the balance sheet presentation of accounts receivable.
Explanation / Answer
Facts of the question:-
Opening Balances:- accounts receivable dr. $506000
uncollectible accounts cr.$45000
Answer to a) Journal entries in books of Mechanical Engi eers, Inc.
1.For recording credit sales
Dr. Accounts Receivable 2,150,000
Cr. Sales 2,150,000
2. For recording cash collections
Dr. Cash and Cash Equivalents 1,950,000
Cr.Dr. Accounts Receivable 1,950,000
3. For writing off uncollecti
Dr. Allowance for Doubtful Accounts 41,000
Cr. Accounts Receivable 41000
Answer to b) Journal entries in books of Mechanical Engi eers, Inc.
1. For bad debts expense
Dr.Uncollectible Accounts Expense 53750(2150000*2.5%)
Cr.Allowance for Doubtful Accounts 53750
Answer to c) Balance Sheet
Assets
Accounts Receivable dr. 665000