Perfect Painting commenced business on March 01, 2018. The business produced monthly financial statements and had...
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Perfect Painting commenced business on March 01, 2018. The business produced monthly financial statements and had total sales of $ 600,000, of which $ 450,000 was on account, during the first 4 months. As of June 30, 2018, no accounts have been written off to date. The accounts receivable had a $ 233,000 balance, which was comprised of the following accounts, aged according to the date of the sale: Customer Mega Contracts Quadra Prints Work Wear Natural Paint Other Accounts Receivable March $ 4,000 2,000 6,000 4,000 22,000 • • • $ 38,000 Month of Sale April $ 2,000 3,000 17,000 8,000 15,000 $ 45.000 May $ 3,000 4,000 10,000 7,000 50,000 $ 74,000 The following accounts receivable transactions occurred in July 2018: June $ 2,000 1,000 3,000 30,000 40,000 $ 76,000 • July 07: Determined the Quadra Prints account was uncollectible and wrote it off. • July 13: Collected $ 9,000 from Mega Contracts for sales made in the first 3 months. July 17: Determined the Work Wear account was uncollectible and wrote it off. July 22: Collected $ 4,000 from Natural Paint for sales made in the month of March. July 28: Received a cheque from Work Wear for $ 12,000 plus three cheques of $ 8,000 each, post-dated for August 28, September 28, and October 28. • July 31: Total sales in the month of July were $ 400,000; 80% of these sales were on account, and 70% of the sales on account were collected in the month. Required: A. Perfect Painting read on the internet that similar companies used the allowance method of accounting for uncollectibles, with many of these companies estimating the uncollectibles through an aging of accounts receivable. 1. Journalize the adjustments that would have to be made on June 30 for the months of March through June, assuming the following estimates of uncollectibles: Age of Accounts Receivable From current month From prior month From 2 months prior From 3 months prior From 4 months prior Percent Estimated Uncollectible 1% 3% 4% 10% 30% 2. Prepare journal entries for the July 2018 transactions. 3. Prepare a journal entry for the month-end adjustment, using the information from the table that appears in part A. B. Use the allowance method, which was used above, to record the following: 1. The balance sheet presentation of the accounts receivable for June and July 2018 2. The effect of the uncollectibles on the income statement for June and July 2018 06 DATE 2018 30 18 Journal ACCOUNT TITLES AND EXPLANATIONS Allowance for Doubtful Accounts Accounts Receivable - Mega Contracts Accounts Receivable - Natural Paint Accounts Receivable - Quadra Prints Accounts Receivable - Work Wear Accounts Receivable - Other Accounts Receivable POST. REF. DEBIT 14,160 CREDIT 1,020 1,940 770 2,870 7,560 | CUSTOMER Mega Contracts Natural Paint Quadra Prints Work Wear Other Accounts Receivable Total Estimated Percent Allowance for Doubtful Accounts *AGING SCHEDULE March April 30% 10% May 4% June 3% July 1% TOTAL Perfect Painting commenced business on March 01, 2018. The business produced monthly financial statements and had total sales of $ 600,000, of which $ 450,000 was on account, during the first 4 months. As of June 30, 2018, no accounts have been written off to date. The accounts receivable had a $ 233,000 balance, which was comprised of the following accounts, aged according to the date of the sale: Customer Mega Contracts Quadra Prints Work Wear Natural Paint Other Accounts Receivable March $ 4,000 2,000 6,000 4,000 22,000 • • • $ 38,000 Month of Sale April $ 2,000 3,000 17,000 8,000 15,000 $ 45.000 May $ 3,000 4,000 10,000 7,000 50,000 $ 74,000 The following accounts receivable transactions occurred in July 2018: June $ 2,000 1,000 3,000 30,000 40,000 $ 76,000 • July 07: Determined the Quadra Prints account was uncollectible and wrote it off. • July 13: Collected $ 9,000 from Mega Contracts for sales made in the first 3 months. July 17: Determined the Work Wear account was uncollectible and wrote it off. July 22: Collected $ 4,000 from Natural Paint for sales made in the month of March. July 28: Received a cheque from Work Wear for $ 12,000 plus three cheques of $ 8,000 each, post-dated for August 28, September 28, and October 28. • July 31: Total sales in the month of July were $ 400,000; 80% of these sales were on account, and 70% of the sales on account were collected in the month. Required: A. Perfect Painting read on the internet that similar companies used the allowance method of accounting for uncollectibles, with many of these companies estimating the uncollectibles through an aging of accounts receivable. 1. Journalize the adjustments that would have to be made on June 30 for the months of March through June, assuming the following estimates of uncollectibles: Age of Accounts Receivable From current month From prior month From 2 months prior From 3 months prior From 4 months prior Percent Estimated Uncollectible 1% 3% 4% 10% 30% 2. Prepare journal entries for the July 2018 transactions. 3. Prepare a journal entry for the month-end adjustment, using the information from the table that appears in part A. B. Use the allowance method, which was used above, to record the following: 1. The balance sheet presentation of the accounts receivable for June and July 2018 2. The effect of the uncollectibles on the income statement for June and July 2018 06 DATE 2018 30 18 Journal ACCOUNT TITLES AND EXPLANATIONS Allowance for Doubtful Accounts Accounts Receivable - Mega Contracts Accounts Receivable - Natural Paint Accounts Receivable - Quadra Prints Accounts Receivable - Work Wear Accounts Receivable - Other Accounts Receivable POST. REF. DEBIT 14,160 CREDIT 1,020 1,940 770 2,870 7,560 | CUSTOMER Mega Contracts Natural Paint Quadra Prints Work Wear Other Accounts Receivable Total Estimated Percent Allowance for Doubtful Accounts *AGING SCHEDULE March April 30% 10% May 4% June 3% July 1% TOTAL
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ans 1 Calculation of estimated uncollectible for June March April May June July Total Mega 4000 2000 ... View the full answer
Related Book For
Horngrens Accounting
ISBN: 978-0133855371
10th Canadian edition Volume 1
Authors: Tracie L. Miller Nobles, Brenda L. Mattison, Ella Mae Matsumura, Carol A. Meissner, Jo Ann L. Johnston, Peter R. Norwood
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