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The Garvey Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates...

The Garvey Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 6% of accounts receivable will eventually be uncollectible. Selected account balances at December 31, 2019, and December 31, 2020, appear below:

12/31/2019

12/31/2020

Net Credit Sales

$425,000

$500,000

Accounts Receivable

80,000

100,000

Allowance for Doubtful Accounts

4,000

?

Instructions:

(a) Record the following events in 2020. Omit explanations. 8pts

Aug. 10 - Determined that the account of Kurt West for $900 is uncollectible.

Sept. 12 - Determined that the account of Jill Lynch for $3,000 is uncollectible.

Oct. 10 - Received a check for $300 as payment on account from Kurt West, whose account had previously been written off as uncollectible.

(b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2020. SHOW CALCULATIONS.

(c) What is the balance of Allowance for Doubtful Accounts at December 31, 2020? SHOW CALCULATIONS.

Solutions

Expert Solution

The allowance method is the process of recording uncollectible accounts receivable as bad debt expense in the same accounting year as of the sale. It adjusts the accounts receivable appearing on the balance sheet.

ekkarill92 answered 2 years ago
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