Your company prepares financial statements only once a year. In accounting for u

Question

Your company prepares financial statements only once a year.  In accounting for uncollectible accounts it uses the allowance method. For the most recent year give general journal entries for the following. Beginning of the year balances:(No journal entries needed for beg. Balances) Accounts Receivable             256,200 Allowance for uncollectible accounts                 6,250 Uncollectible Accounts Expense                       -   1 Sales for the year were 1,585,000.  70% of sales are credit sales 2 Collection on credit sales for the year were 1,070,000 3 Wrote off 10500 of specific customer accounts 4a At year end estimate uncollectible accts to be 1.75% of credit sales 4b Instead of 4a, the company ages it receivables and estimated 7500 as uncollectible

Explanation / Answer

Hi,

Please find the answer as follows:

Part A:

Accounts Receivables (1585000*70%) Dr. 1109500

Cash Dr. 475500

Sales Cr. 1585000

Part B:

Cash Dr. 1070000

Accounts Receivables Cr. 1070000

Part C:

Bad Debts Expense Dr. 10500

Accounts Receivables Cr. 10500

Part D:

Bad Debts (1109500*1.75%) Dr. 1916.25

Provision/Allowance for Bad Debts Cr. 1916.25

Part E:

Bad Debts Dr. 7500

Provision/Allowance for Bad Debts Cr. 7500

Thanks.

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