The following balances relate to Easter Company: Several transactions related to

Question

The following balances relate to Easter Company: Several transactions related to accounts receivable occurred during 2015. An account with a balance of $600, previously written off, is collected during 2015. Furthermore, $1,000 of the Easter's accounts receivable are written off in 2015 as uncollectible. At the end of the year, annual bad debts are estimated to be 3% of credit sales. What is the ending balance in accounts receivable and allowance for bad debts accounts at December 31, 2015 (after adjustment)?

Explanation / Answer

Balances as on 31 dec 2015

Accounts receivable

Opening balance: $ 100000

Add: credit sales: $ 2000000

less: a/c receivable written off: ($1000)

less:annual bad debts (2000000*3%): ($ 60000)

Closing balance = $2039000

Allowance for bad debts

Opening balance: $ 8000

Add: created during the year: $ 60000

less: bad debt recovered : ($600)

less: bad debt written off: ($1000)

Closing balance : $66400

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