Question

The December 31, 2017 statement of financial position of the ABC Company included the following information: 

Accounts Receivable €112,000  Less: Allowance for Doubtful Accounts €2,240

During the company’s fiscal year ending December 31, 2018, the following transactions occurred:

1. Sales on credit €437,300;

2. Collections on accounts previously written off as worthless €230 (Hint: Re-establish the receivable account);

3. Accounts receivable written off as uncollectible €2,290;

4. Collections of accounts receivable €440,500;

5. Bad debts were estimated to be 1,8% of accounts receivable.

Instructions a) Prepare journal entries necessary for ABC Company to record the preceding transactions. b) Prepare an analysis and schedule that shows the amounts of the accounts receivable, allowance for doubtful accounts that will be disclosed on ABC’s December 31, 2018 statement of financial position

Answer 1

	Journal entries in the books of ABC company
Date	Particulars	Debit ($)	Credit ($)
31/12/2018	Accounts Receivable	437300
	Sales		437300
	To record credit sales during the year
31/12/2018	Accounts Receivable	230
	Bad debts written off		230
	To re-establish the Accounts receivable written off previously
	Cash /Bank	230
	Accounts Receivable		230
	To record bad debts recovered
31/12/2018	Bad debts written off	2290
	Accounts Receivable		2290
	To record write off of uncollectible amounts
31/12/2018	Cash /Bank	440500
	Accounts Receivable		440500
	To record collections from debtors
31/12/2018	Bad debts	1877
	Provision for bad debts		1877
	To provide for 1.8% of accounts receivable

Accounts Receivable on 31 December 2018
Particulars	Amount ($)	Amount ($)
Opening Balance on 1.1.2018		109760
Add:
Credit sales during the year	437300
Reversal of write off	230
Total receipts		437530
Less:
Collections	440500
Bad debts recovered	230
Total collections		440730
Accounts receivable		106560
Less: Bad debts written off		2290
Less: Provision for bad debts @ 1.8% on 104270 i.e. 1.8% on balance (106560-2290)		1877
Accounts receivable (Net)		102393