Problem 8: Anderson starts the year with Accounts Receivable $40,000 (Dr.), and
ID: 2563586 • Letter: P
Question
Problem 8:
Anderson starts the year with Accounts Receivable $40,000 (Dr.), and Allowance for Doubtful Accounts $6,000 (Cr.). During the year, Anderson made net credit sales $550,000, collected cash $245,000 from customers, and wrote-off $4,000 of accounts that were deemed uncollectible.
At the end of year, what are the unadjusted trial balance for accounts receivable and Allowance for doubtful accounts?
At the end of the year, the accountant decides that about 2% of outstanding accounts receivables are uncollectible. Prepare the adjusting journal entry.
Ignore the information in Part b. At the end of the year, the accountant estimates that 2.5% of credit sales are uncollectible. Prepare partial balance sheet at the end of year to present accounts receivable.
Explanation / Answer
Accounts receivable opening 40,000 cash 245,000 sale 550,000 w/off 4,000 balance 341,000 Allowance for Doubtful accounts w/off 4,000 BB 6,000 unadjusted balance 2,000 1) Unadjusted Trial balance for Accounts receivable 341,000 Allowance for Doubtful accounts 2,000 2) Adjusting entry Accounting titles & Explanations Debit Credit Bad debts expense 4820 Allowance for Doubtful accounts 4,820 (341,000*2% - 2000) 3) Balance Sheet (partial) Accounts receivable 341,000 less:allowance for doubtful accounts 15750 (550,000*2.5% +2,000) Net account receivable 325,250