On August 31, 2016, Lily Floral Supply had a $145,000 debit balance in Accounts Receivable and a

Question:

On August 31, 2016, Lily Floral Supply had a $145,000 debit balance in and a $5,800 credit balance in Allowance for Bad Debts. During September, Lily made
• Sales on account, $540,000. Ignore Cost of Goods Sold.
• Collections on account, $581,000.
• Write-offs of uncollectible receivables, $5,000.
Requirements
1. Journalize all September entries using the allowance method. Bad debts expense was estimated at 1 % of credit sales. Show all September activity in Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts).
2. Using the same facts, assume that Lily used the direct write-off method to account for uncollectible receivables. Journalize all September entries using the direct write-off method. Post to and Bad Debts Expense, and show their balances at September 30, 2016.
3. What amount of Bad Debts Expense would Lily report on its September income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason.
4. What amount of net would Lily report on its September 30,
2016, under each of the two methods? Which amount is more realistic? Give your reason. Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that... Balance Sheet
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