Intro to acounting help please and thank you! Accounting for Accounts Receivable
ID: 2491917 • Letter: I
Question
Intro to acounting help please and thank you!
Accounting for Accounts Receivable The December 31, 2013, balance sheet of the Kramer Company had Accounts Receivable of $650,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During 2014, the following transactions occurred: sales on account $1,550,000; sales returns and allowances. $100,000; collections from customers. $1,250,000; accounts written off, $35,000; previously written off accounts of $8,000 were collected. Instructions Journalize the 2014 transactions. If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 6% of accounts receivable, what is the adjusting entry at December 31, 2014?Explanation / Answer
(a) Journalize the 2014 transactions.
Sales on account $1,550,000;
Dr Accounts Receivable 1,550,000
Cr Sales 1,550,000
Sales returns and allowances, $100,000;
Dr Sales Returns and Allowances 100,000
Cr Accounts Receivable 100,000
Collections from customers, $1,250,000;
Dr Cash 1,250,000
Cr Accounts Receivable 1,250,000
Accounts written off, $35,000;
Dr Allowance for Doubtful Accounts 35,000
Cr Accounts Receivable 35,000
Previously written off accounts of $8,000 were collected
Dr Accounts Receivable 8,000
Cr Allowance for Doubtful Accounts 8,000
Dr Cash 8,000
Cr Accounts Receivable 8,000
(b) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 6% of accounts receivable, what is the adjusting entry at December 31, 2012?
Ending balance of Accounts Receivable:
=650,000 + 1,550,000 - 100,000 - 1,250,000 - 35,000 + 8,000 - 8,000
= 815000
Ending balance of Allowance for Doubtful Accounts:
=33,000 - 35,000 + 8,000
= 6,000
Amount estimated to be uncollectible:
815000 x 6% = 48900
Amount of adjustment:
48900 - 6,000 = 42900
Dr Bad Debt Expense 42900
Cr Allowance for Doubtful Accounts 42900
The Allowance account now has a credit balance of 48900, the same amount that is estimated to be uncollectible.
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