Company sells products to its cusotmers on credit basis, adjusting entry for bad debt expense is recorded at Dec 31. The 2017 bs disclosed: Current assets: receivables, net of allowance for uncollectible accounts of $50,000 $532,000. During 2018, credit sales were $1,850,000, cash collections from customers were $1,930,000, and $59,000 in accounts receivable were written off. In addition, $5,000 was collected from a customer whose account was written off in 2017. An again of accounts receivable at Dec 31, 2018 reveals the following: Age group % of year end receivables in group % uncollible 0-60 days 65% 4% 61-90 days 15% 10% 91-120 days 15% 30% Over 120 days 5% 50% #1. Prepare summary journal entries to account for the 2018 write off and the collection of the receivable previously written off. #2. Prepare the year end adjsuting entry for bad debts accoridng to each of the following situations: a. Bad debt expense is estimated to be 3% of credit sales for the year. b. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year end balance in accounts receivable. #3. For situations (a) -(b) in requirement 2 above, what would be the net amount of accounts receivable in the 2018 balance sheet? Could you please show me how to do this? Thanks.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Company sells products to its cusotmers on credit basis,
Age group % of year end receivables in group % uncollible
0-60 days 65% 4%
61-90 days 15% 10%
91-120 days 15% 30%
Over 120 days 5% 50%
#1. Prepare summary
#2. Prepare the year end adjsuting entry for
a. Bad debt expense is estimated to be 3% of credit sales for the year.
b. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year end balance in accounts receivable.
#3. For situations (a) -(b) in requirement 2 above, what would be the net amount of accounts receivable in the 2018 balance sheet?
Could you please show me how to do this? Thanks.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps with 3 images
