Closing balance of Accounts receivable is 31395 One Product Corp. (OPC) incorpor

Question

Closing balance of Accounts receivable is 31395

One Product Corp. (OPC) incorporated at the beginning of last year. The balances on its postclosing trial balance prepared on December 31, at the end of its first year of operations, were: Cash Accounts Receivable Allowance for Doubtful Accounts Inventory Prepaid Rent Equipment Accumulated Depreciation Accounts Payable Sales Tax Payable FICA Payable Withheld Income Taxes Payable Salaries and Wages Payable Unemployment Tax Payable Unearned Revenue Interest Payable Note Payable (long-term) Common Stock Additional Paid-In Capital, Common Retained Earnings Treasury Stock $19,500 8,250 885 12,060 1,600 25,000 2,400 600 500 1600 300 4.500 495 22.000 13.300 19.210 4.120 4.000 The followin g information is relevant to the first month of operations in the following year

Explanation / Answer

Allowance for doubtful accounts Beginning balance 885 01/05 write off as uncollectible -950 Current balance -65 Debit Allowance for dubtful accounts balance should be =31395*2%=628 Hence adjustment needed in allowance for doubtful accounts=628+65=693 credit Date General journal Debit Credit Jan 31. Baddebt expense 693 Allowance for doubtful accounts 693 (Adjustment entry for recording baddebt expense)

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