On July 31, 2014, D’Amico Management Inc. reported the following account balance
ID: 2451308 • Letter: O
Question
On July 31, 2014, D’Amico Management Inc. reported the following account balances in its financial statements:
Accounts receivable............................................................. $ 960,000
Allowance for doubtful accounts......................................... $ 82,000
Bad debt expense................................................................. $ 78,000
During Aug 1 and Dec 31, 2014, D’Amico Management Inc. had the following transactions related to receivables, which occurred in order: The company prepares financial statements annually.
a. Sales were $4,000,000, of which $3,200,000 were on account.
b. Collections of accounts receivable were $3,100,000.
c. Write-offs of accounts receivable were $80,000.
d. Recoveries of accounts previously written off as uncollectible were $5,000.
1. Prepare the journal entries at the end of 2014 to record each of the four transactions (a)-(d) above.
Explanation / Answer
Journal Entries:
S,No.
Account Titles and Explanation
Debit
Credit
a.
Accounts Receivables
$ 3,200,000
Cash (4000000-3200000)
$ 800,000
Sales
$ 4,000,000
(Being sales made)
b.
Cash
$ 3,100,000
Accounts Receivables
$ 3,100,000
(Being amount collected )
c.
Allowances for doubtful accounts
$ 80,000
Accounts Receivables
$ 80,000
(Being account written off)
d.
Accounts Receivables
$ 5,000
Allowances for doubtful accounts
$ 5,000
(Being written off account reversed )
Cash
Accounts Receivables
$ 5,000
(Being amount collected)
$ 5,000
Journal Entries:
S,No.
Account Titles and Explanation
Debit
Credit
a.
Accounts Receivables
$ 3,200,000
Cash (4000000-3200000)
$ 800,000
Sales
$ 4,000,000
(Being sales made)
b.
Cash
$ 3,100,000
Accounts Receivables
$ 3,100,000
(Being amount collected )
c.
Allowances for doubtful accounts
$ 80,000
Accounts Receivables
$ 80,000
(Being account written off)
d.
Accounts Receivables
$ 5,000
Allowances for doubtful accounts
$ 5,000
(Being written off account reversed )
Cash
Accounts Receivables
$ 5,000
(Being amount collected)
$ 5,000
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