Question

At September 30, 2018, the accounts of South Terrace Medical Center (STMC) include the following:

Accounts Receivable $145,000

Allowance for Bad Debts 3,600

During the last quarter of 2018, STMC completed the following selected transactions:

-Sales on account, $490,000. Ignore Cost of Goods Sold.

-Collections on account $374,100.

-Wrote off accounts receivable as uncollectible: Roho Co.:$1,900, Oliver Jones: $1,000, Parrot Inc.:$400

-Recorded bad debts expense based on the aging of accounts receivable, as follows:

A/R: 1-30 days: $95,000, 31-60 days: $37,000, 61-90 days: $17,000, over 90 days: $108,600

Estimated percent uncollectible: 1-30 days: 0.3%, 31-60 days: 3%, 61-90 days: 30%, over 90 days: 35%

Requirement 1: open t-accounts for accounts receivable and allowance for bad debts. Journalize the transactions and post to the two accounts. Begin by journalizing the transactions.

Sales on account, $490,000. Ignore cost of goods sold.

(Journal entry)

Collections on account, $374,100

(Journal entry)

Wrote off accounts receivable as uncollectible: Roho Co.:$1900, Oliver Jones: $1,000, Parrot Inc: $400.

(Journal entry)

Recorded bad debts expense based on the aging of accounts receivable

(Journal entry)

Open t-accounts for accounts receivable and allowance for bad debts. Post the transactions to the two accounts.

Requirement 2: show how South Terrace Medical Center should report net accounts receivable on its December 31, 2018, balance sheet

(Balance sheet partial)

Answer 1

Estimated Allowance:
Age group		AR	% Uncollectible		Estimated Allowance
1-30 days		95000	0.3%		285
31-60 days		37000	3%		1110
61-90 days		17000	30%		5100
Over 90 days		108600	35%		38010
			Estimated Allowance		44505
Actual Allowance balance:
Beginning Balance				3600
Less: Amount write off (1900+1000+400)				-3300
Actual Allowance balance:				300
Required balance				44505
Bad debts expense				44205
Journal entries:
S.no.	Accounts title and explanations				Debit $	Credit$
a.	Accounts receivable Dr.				490000
	Sales revenue					490000
b.	Cash account Dr.				374100
	Accounts receivable					374100
c.	Allowance for Bad debts Dr.				3300
	Accounts receivable					3300
d.	bad debts expense Dr.				44205
	Allowance for bad debts					44205
Accounts receivable
Balance		145,000	Cash account		374,100
Sales revenue		490,000	Allowance		3300
Balance		257,600
Allowance for Bad debts
Accounts receivable		3,300	Balance		3,600
			Bad debts expense		44205
			Balance		44505
Req 2.
Accounts receivable(Gross)			257600
Less: Allowance for bad debts			44505
Accounts receivable-Net			213095