Question

Accounts receivable for Pressure Oil Ltd. were reported on the statement of financial position prepared at the end of 20X8, as follows:


In 20X9, the following transactions took place:
Sales on account $ 841,610
Cash collected on account 799,430 Sales returns and allowances given to customers 3,210 Accounts written off 2,150 Accounts previously written off but recovered 650
Additional information: The company sells goods on account. At the end of the year, accounts receivable are aged and the following percentages are applied in arriving at an estimate of the charge for doubt-full accounts.
Estimated loss
Current accounts ................... 0%
Accounts 1– 2 months overdue............. 7%
Accounts 3– 6 months overdue ............. 20%
Accounts 7– 12 months overdue............. 50%
Accounts more than 1 year overdue............ 95%
At the end of the year, most of the accounts receivable are current. However, the aging schedule (after write- offs and recoveries) shows the following:
Accounts 1– 2 months overdue ............. $ 7,500
Accounts 3– 6 months overdue ............. 6,100
Accounts 7– 12 months overdue ............. 2,500
Accounts more than 1 year overdue ............ 880
An analysis shows that the allowance for sales returns should have a balance of $ 2,200 at the end of the year.

Required:
1. Give the entries required to record the transactions listed above and also to adjust the ac-counts. Sales returns and allowances should be entered directly in the sales returns and allowances income statement account. he allowance for sales returns is adjusted at year- end only.
2. Calculate the balance for accounts receivable and the related allowances as at 31 December 20X9, and show these accounts as they will appear on the statement of financialposition.


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  • CreatedFebruary 17, 2015
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