Receivable - Bad debt allowance During 2017, ABC Company completed the following transactions pertaining to allowance method
Question:
Receivable - Bad debt allowance
During 2017, ABC Company completed the following transactions pertaining to allowance method to account for bad debts:
i. Sales revenue on credit, $320,000
ii. Collections on account, $340,000
iii. Write-offs of uncollectable, $5,500
iv. Bad debt expense, 2% of sales revenue
The journals to record the above transactions are shown below:
Debit | Credit | ||
i | Accounts Receivable | $320,000 | |
Sales revenue | $320,000 | ||
ii | Cash | $40,000 | |
Accounts Receivable | $40,000 | ||
iii | Allowance for doubtful debts | $5,500 | |
Accounts Receivable | $5,500 | ||
iv | Bad debt expense | $6,400 | |
Allowance for doubtful debts | $6.400 | ||
(320,000*2% = $6,400) | |||
Assume ABC company has the opening balance (1/7/2016) of Allowance for doubtful debts as $1,000, then the ending balance (30/6/2017) of Allowance for doubtful debts is $6,400 + $1,000 - $5,500 = $1,900. The Net Accounts Receivable at 30/6/2017 is therefore ($320,000 - $40,000 - $5,500) - $1,900 = $272,600. Now, let's try the above question with different values as follows:
During 2017, ABC Company completed the following transactions pertaining to allowance method to account for bad debts:
i. Sales revenue on credit, $337625
ii. Collections on account, $164083
iii. Write-offs of uncollectable, $21627
iv. Bad debt expense, 7% of sales revenue
v. The opening balance of Allowance for doubtful debts is $14428
Work out the journals to record the above transactions and calculate the Net Accounts Receivable as at 30/6/2017 in the answer block below.
Horngrens Financial And Managerial Accounting The Financial Chapters
ISBN: 9780134486840
6th Edition
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura