Question: At 31 December 20X8 Security Controls Limited reported gross accounts

At 31 December 20X8, Security Controls Limited reported gross accounts receivable of $ 1,240,900. Investigation showed the following:
a. Customers are permitted to return 2% of annual sales for full credit, as long as goods are returned in good condition within 30 days of delivery. Based on past years’ experience, $ 25,100 of goods might be returned. As returns are received during the year, the sales returns account, a contra account to sales, is increased. An allowance for sales returns exists, at $ 19,600, unchanged from the previous year- end.
b. he credit balance in the allowance for doubtful accounts was $ 91,200 ater write- ofs for the year but before any bad debt adjustment. Bad debt expense is based on a percentage of receivables. Based on the latest available facts, $ 140,000 will not be collected due to collection issues.
c. Terms of 1/ 10, n/ 30 were granted to all customers. Accounts receivable were recorded gross, and the discounts taken were recorded when taken by the customers in a discounts account, reported contra to the sales account. Estimated discounts inherent in the closing accounts receivable balance were $ 15,300. he allowance for sales discounts account was established at $ 14,900 last year and has not been adjusted since.

1. Prepare year- end adjusting entries with respect to accounts receivable.
2. Show how the net accounts receivable would appear on the statement of inancial posi-tion on 31 December 20X8.

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  • CreatedFebruary 17, 2015
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