The following balances relate to Easter Company: Credit Sales during 2018 Allowa

Question

The following balances relate to Easter Company: Credit Sales during 2018 Allowance for Bad Debt (1/1/18) 9,000 (credit) Accounts Receivable (1/1/18) 2,000,000 100,000 Several transactions related to accounts receivable occurred during 2018. (1) An account with a balance of $800, previously written off, is collected during 2018. (2) Furthermore, $1,200 of the Easter's accounts receivable are written off in 2018 as uncollectible (3) 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, 2018 (after adjustment)?

Explanation / Answer

Bad debts for the year = 2,000,000*3% 60000 Account receivable opening bal 100,000 1) 800 1) 800 2) 1,200 Credit sales 2,000,000 end bal 2,098,800 Allowance for bad debts 2) 1,200 opening balance 9,000 1) 800 Adjustment 60,000 End bal 68,600

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