Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2018, accounts...

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

Solutions

Expert Solution

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

ekkarill92 answered 1 year ago

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