Account Receivable Entries The following financial information pertains to Sleep
ID: 2449590 • Letter: A
Question
Account Receivable Entries The following financial information pertains to Sleepy Company: Accounts receivable, 12/31/09 $ 275,000 Allowance for bad debts, 12/31/09 8,400 Net credit sales, 2010 1,980,000 Collections on credit sales during 2010 1,730,000 Accounts receivable written off in 2010 6,500 Required a. Prepare all the necessary journal entries for 2010 sales, collections, and write-offs (using the direct write-off method). b. Prepare 2010 journal entries to record write-offs and to estimate bad debt expense assuming bad debt expense is estimated on a (i) percentage of net credit sales basis (2%) and (ii) percentage of accounts receivable basis (5%). c. What is the net realizable value of accounts receivable in parts b(i) and b(ii)? d. Explain the rationale for each of the methods in part b.
Explanation / Answer
a.
Entry for Sales Made on Credit:
Account Recevable Dr. 1,980,000
To Sales 1,980,000
(Being sales on credit made)
Entry for Collection:
Bank Dr. 1,730,000
To Account Receivable 1,730,000
(Being Amount Received on credit sales made)
Entry for Write-off:
Bad Debts Dr. 6,500
To Accounts Receivable 6,500
(being bad debts written off)
b.
(i) etimated bad debts= 1,980,000*2%= 39,600
(ii)etimated bad debts= 1,980,000*5%= 99,000
Journal Entry
(i) Bad Debts Expenses Dr. 39,600
To allownces for bad debts 39,600
(Being allownces for bad debts created)
(ii)Bad Debts Expenses Dr. 99,000
To allownces for bad debts 99,000
(Being allownces for bad debts created)
c.
Net Receivable in b(i)
Opening Account Receivable (a) 275,000
Net Crdit Sales During The Year (b) 1,980,000
Total REceivable At the year end (c) =(a)+(b)= 2,255,000
opening Allownces (d) 8,400
Allownces made during the year (e) 39,600
Total Allownces at the year end (f)= (d)+(e) 48,000
Collections during the year (g) 1,730,000
Closing Net Receivable =
OPening Net Eeivable+CRedit Sales During the year-(OPening Allownces-+Allownces made during the year+Collection During The Year)
= 275,000+1.980,000-(8,400+39,600+1,730,000)
= 2,255,000-1,778,000
= 477,000
Net Receivable in b(ii)
Opening Account Receivable (a) 275,000
Net Crdit Sales During The Year (b) 1,980,000
Total REceivable At the year end (c) =(a)+(b)= 2,255,000
opening Allownces (d) 8,400
Allownces made during the year (e) 99,000
Total Allownces at the year end (f)= (d)+(e) 107,400
Collections during the year (g) 1,730,000
Closing Net Receivable =
OPening Net Eeivable+CRedit Sales During the year-(OPening Allownces-+Allownces made during the year+Collection During The Year)
= 275,000+1.980,000-(8,400+99,000+1,730,000)
= 2,255,000-1,837,400
= 417,600
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.