E8-21 Journalizing transactions using the direct write-off method versus the all

Question

E8-21 Journalizing transactions using the direct write-off method versus the allowance method During August 2018, Lima Company recorded the following . Sales of $133,300 ($122,000 on account $11,300 for cash). Ignore Cost of Goods Sold. Collections on account, $106,400. . Write-offs of uncollectible receivables, $990. . Recovery of receivable previously written off, $800. Requirements 1. Journalize Lima's transactions during August 2018, assuming Lima uses the direct write-off method 2. Journalize Lima's transactions during August 2018, assuming Lima uses the allowance method. E8-22 lournalizing credit sales nate receiuahle transatinn n i

Explanation / Answer

Journal Entry of Lima transaction during August 2018, assuming Lima uses the direct writeoff method -

Journal Entry of Lima transaction during August 2018, assuming Lima uses the allowance method -

Please comment in case of further clarification.

Dr. Cr. Cash 11300 Accounts receivables 122000 To sale 133300 (Being sale in cash and on account) Cash 106400 Accounts receivable 106400 (Being Cash received on account) Bad debts 990 To accounts receivable 990 (Being unclooectible receivables) Accounts receivable 800 To Bad debts 800 (Being bad debts becomes accounts receivable) Cash A/c 800 To Accounts receivable 800 (Being cash received)

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