Problems 18 Accounts receivable entries LO1,2,3 During the 2015-16 financial yea

Question

Problems 18 Accounts receivable entries LO1,2,3 During the 2015-16 financial year CE Electronics entered into the following transactions: Sales on account Collections of credit sales Write off accounts deemed uncollectible Received payments on accounts previously written of $1 400000 1225000 20000 7 500 On its 30 June 2016 statement of financial position, CE reported gross accounts receivable of $707000 and an allowance account of $43000. Required Prepare all journal entries to record each of the transactions that occurred in 2015-16 and the journal entry to record bad debt expense at 30 June 2016, assuming that 7 per cent of accounts receivable at 30 June are uncollectible

Explanation / Answer

SOLUTION:

Journal entries:

Debit

Credit

Jun-30

Accounts receivable

1,400,000

Sales revenue

1,400,000

Jun-30

Cash

1,225,000

Accounts receivable

1,225,000

Jun-30

Allowance for bad debts

20,000

Accounts receivable

20,000

Jun-30

Accounts receivable

7,500

Allowance for bad debts

7,500

Jun-30

Cash

7,500

Accounts receivable

7,500

Jun-30

Bad debt expense

29,840

Allowance for bad debts

29,840

Working:

Accounts receivable = (1,400,000 + 707,000 + 7,500) - (1,225,000 + 20,000 + 7,500) = 862,000

Allowance for bad debts = (862,000 * 0.07) - (43,000 + 7,500) + 20,000 = 29,840

Debit

Credit

Jun-30

Accounts receivable

1,400,000

Sales revenue

1,400,000

Jun-30

Cash

1,225,000

Accounts receivable

1,225,000

Jun-30

Allowance for bad debts

20,000

Accounts receivable

20,000

Jun-30

Accounts receivable

7,500

Allowance for bad debts

7,500

Jun-30

Cash

7,500

Accounts receivable

7,500

Jun-30

Bad debt expense

29,840

Allowance for bad debts

29,840

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