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Question 4 StorageTek Corporation gathered the following information from its accounting records for the year ended...

Question 4

StorageTek Corporation gathered the following information from its accounting records for the year ended December 31, 2016, prior to adjustment:

  •     Net credit sales for the year = $1,150,000
  •     Accounts Receivable (Dec 31, 2016) = $93,000
  •     Allowance for Uncollectible Accounts, prior to adjustment (Dec 31, 2016) = $6,000 debit balance
  •     StorageTek Corporation uses the allowance method of accounting for bad debts and estimates

bad debts at 3% of net credit sales.

  1.    Prepare the adjusting entry on December 31, 2016.
  2.    Determine the balance in the Allowance for Uncollectible Accounts account after the adjusting

entry is recorded.

  1.    Show how the receivables would be reported on the December 31, 2016, Balance Sheet for

Storage Tek Corporation.

Solutions

Expert Solution

A) The adjusting entry on December 31, 2016 is as follows:

Date Account and Explanation Debit($) Credit($)
Dec.31,2016 Bad Debt Expenses ( $1,150,000 * 3%) + $6,000         40,500
    Allowance for Doubtful account         40,500
(Recorded the Bad Debt Expenses )

B)The balance in the Allowance for Uncollectible Accounts account after the adjusting entry is recorded is $1,150,000 * 3% = $34,500.

C) The receivables would be reported on the December 31, 2016, Balance Sheet for Storage Tek Corporation is as follows:

                                         Storage Tek Corporation

                            Balance Sheet as on December 31, 2016

Assets $ $
Account Receivable (Gross) 93,000   
Less: Allowance for Doubtful account      (34,500)
Account Receivable,Net       $58,500

ekkarill92 answered 2 years ago
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