The net accounts receivable on the books of GJY Corporation as of 1 January 20X3 are as follows:
Accounts receivable .......... $ 562,000
Less: Allowance for sales discounts.... 12,000
Allowance for doubtful accounts.... 41,300
................. $ 508,700
During the year, the sales discount allowance is let unchanged, with discounts recorded directly in the sales discounts account. Allowances are adjusted at year- end. Summarized transactions during 20X3 are as follows:
a. Sales revenue was $ 1,240,000, of which 70% was on credit.
b. Customers paid of $ 985,000 of the outstanding accounts receivable. Of this reduction to the accounts receivable, $ 600,000 was paid in time to earn a 2% discount.
c. Accounts of $ 15,300 were written off at year- end.
d. here were recoveries of previously written- off accounts in the amount of $ 2,800.
e. At year- end, analysis of accounts receivable indicates that an allowance of $ 7,900 is needed for sales discounts.
f. At year- end, the allowance for doubtful accounts is increased by 1% of gross credit sales.
1. Prepare journal entries for the above transactions.
2. Show how the net accounts receivable appear on the statement of financial position on 31 December 20X3.
3. Do you have any concerns about the level of the allowance for doubtful accounts? Explain.