Question

The Lynbrook Rentals Company offers credit terms to all of its customers. At the end of 2019, accounts receivables totaled $3,400,000. During 2020 credit sales were $2,100,000 and cash collections from customers were $3,700,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $42,000 at the beginning of 2020 and $70,000 in receivables were written off during the year as uncollectible. In addition, $20,000 was collected from a customer whose account was written off in 2019. The allowance for uncollectible accounts is determined by an ageing of accounts receivable. An aging of accounts receivable at December 31, 2020, reveals the following:

Age Group   Percentage of Year-end Receivable in Group Percent Uncollectible

0-60 days 55%   5%

61-90 days 30 15

91-120 days 10 45

Over 120 days 5 60

Required:

a. Prepare journal entries to record the write-off of receivables, collection of the accounts receivable previously written off, and the year-end adjusting entry for bad debt expense.
b. Show how accounts receivables would be presented in the 2020 year-end balance sheet?

Answer 1