In: Accounting
The following information is available for Quality Book Sales'
sales on account and accounts receivable:
Accounts receivable balance, January 1, Year 2 | $ | 125,900 | |
Allowance for doubtful accounts, January 1, Year 2 | 3,520 | ||
Sales on account, Year 2 | 812,740 | ||
Collection on accounts receivable, Year 2 | 844,776 | ||
After several collection attempts, Quality Book Sales's wrote off
$2,520 of accounts that could not be collected. Quality Book Sales
estimates that 1.25 percent of sales on account will be
uncollectible.
Required
a. Compute the following amounts:
Answer:
Accounts Receivable |
Allowance for Doubtful Accounts |
|||
Bal. 125,900 |
Bal. 3,520 |
|||
sales 812,740 |
coll. 844,766 |
write-off 2,520 |
||
write-off 2,520 |
Bal. 1,000 |
|||
Bal. 91,354 |
est. 141.925 |
|||
Bal. 1,141.925 |
a. (1) $91,354 x 1.25% = $1141.925 - $1,000 = 141.925
a. (2) $91,354 - $1,141.925 = $90,212.075
b. The amount recorded as an expense is an estimate based on the current balance of accounts receivable. It is not currently known which specific accounts are not collectible. The amount that was written off as uncollectible are those accounts that have actually been determined to be uncollectible.
refer entries:
Event |
Account Title |
Debit |
Credit |
1. |
Accounts Receivable |
812,740 |
|
Sales Revenue |
812,740 |
||
2. |
Cash |
844,766 |
|
Accounts Receivable |
844,766 |
||
3. |
Allowance for Doubtful Accounts |
2,520 |
|
Accounts Receivable |
2,520 |
||
4. |
Uncollectible Accounts Expense |
141.925 | |
Allowance for Doubtful Accts. |
141.925 | ||