Complete journal entries for the following transactions: Sales for the month of

Question

Complete journal entries for the following transactions: Sales for the month of June were $75,000. Using a percentage allowance method of 1% record the allowance. On June 30, it was determined that two customers with receivables totaling $980 were not likely to pay On July 15, surprisingly one of the customers who owed $400 and was written off on June 30, paid their bill On July 31, our fiscal year ends, the allowance for doubtful accounts has a balance of $1,780 The company uses an aging method to calculate the desired allowance balance. An accounts receivable aging shows the following: 30 days or less = $68,500 31 -60 days = $10,400 61-90 days = $4,300 Over 90 days = $1,200 The company wants an ending reserve equal to: 30 days or less = 1% 31-60 days = 3% 61-90 days = 5% over 90 days = 15%

Explanation / Answer

Journal Entries:

Date Accounts Titles and explanation Debit $ Credit $ Accounts Receivable 75000 Revenue 75000 Bad Debts 750 Allowance for doubtful accounts 750 June 30 Allowance for doubtful accounts 980 Accounts Receivables 980 Bad Debts 230 Allowance for doubtful accounts 230 (allowance balance off to bad debts) July 15 Cash 400 Accounts Receivable 400 Accounts Receivables 400 Allowance for doubtful accounts 400 (accounts receivables written off reversed) July 31 Allowance for doubtful accounts 388 Bad Debts 388 (bad debts reversed to maintain reserve to doubtful accounts to $1392 from $1780 as on July 31)

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