Lopez Company began operations on January 1, 2010, and it estimates uncollectibl
ID: 404882 • Letter: L
Question
Lopez Company began operations on January 1, 2010, and it estimates uncollectible accounts using the allowance method. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows
In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible.
In adjusting the accounts on December 31, the company estimated that 1.70% of accounts receivable will be uncollectible.
Lopez Company began operations on January 1, 2010, and it estimates uncollectible accounts using the allowance method. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows
Explanation / Answer
opez Company began operations on January 1, 2010. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows.
2010
a. Sold $1,345,600 of merchandise (that had cost $979,400) on credit, terms n/30.
Debit: Accounts Receivable 1,345,600
Credit: Sales 1,345,600
Debit: Cost of Goods Sold 979,400
Credit: Merchandise Inventory 979,400
b. Wrote off $19,300 of uncollectible accounts receivable.
Debit: Allowance for Doubtful Accounts 19,300
Credit: Accounts Receivable 19,300
c. Received $667,500 cash in payment of accounts receivable.
Debit: Cash 667,500
Credit: Accounts Receivable 667,500
d. In adjusting the accounts on December 31, the company estimated that 1.10% of accounts receivable will be uncollectible.
Accounts receivable = 1,345,600
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