In: Accounting
Colorado Rocky Cookie Company offers credit terms to its
customers. At the end of 2018, accounts receivable totaled
$710,000. The allowance method is used to account for uncollectible
accounts. The allowance for uncollectible accounts had a credit
balance of $49,000 at the beginning of 2018 and $29,500 in
receivables were written off during the year as uncollectible.
Also, $2,900 in cash was received in December from a customer whose
account previously had been written off. The company estimates bad
debts by applying a percentage of 10% to accounts receivable at the
end of the year.
Required:
1. Prepare journal entries to record the write-off of receivables, the collection of $2,900 for previously written off receivables, and the year-end adjusting entry for bad debt expense.
4 ENTRIES
Record the write-off of receivables.
Record the reinstatement of an account previously written off.
Record collection of account previously written off.
Record bad debt expense for the year.
2. How would accounts receivable be shown in the
2018 year-end balance sheet?
Net
1.
Journal Entries
Transaction No | Particulars | Debit ($) | Credit($) |
1 | Allowance for uncollectible a/c Dr | 29,500 | |
To accounts Receivable a/c | 29,500 | ||
(Being record the write off of receivables) | |||
2 | Accounts Receivable a/c Dr | 2,900 | |
To Allowance for uncollectible accounts a/c | 2,900 | ||
(Being reinstate an account peviously written off) | |||
3 | Cash a/c Dr | 2,900 | |
To Accounts receivable a/c | 2,900 | ||
(Being record the collection) | |||
4. | Bad debt expene a/c Dr | 48,600* | |
To Allowance for uncollectible accounts a/c | 48,600* | ||
(Being record the bad debt expense) |
2. $639,000
Explanation:
1. *
Allowance for uncollectible accounts | Amount ($) |
Balance, Beginning of year | 49,000 |
Deduct: Receivable written off | -29,500 |
Add: Collection of receivable previously written off | 2,900 |
Balance, before adjusting entry for 2018 baddebts(49,000-29500+2900) | 22400 |
Required allowance: (710,000*10%) | 71,000 |
Bad debt expense (22,400-71,000) | 48,600* |
2. Accounts receivable be shown in 2018year end balance sheet = $710,000 - $71,000
= $639,000