Question

The following events occur for The Underwood Corporation during 2018 and 2019, its first two years of operations. June 12, 2018 Provide services to customers on account for $38,000. September 17, 2018 Receive $22,500 from customers on account. December 31, 2018 Estimate that 45% of accounts receivable at the end of the year will not be received. March 4, 2019 Provide services to customers on account for $53,000. May 20, 2019 Receive $10,000 from customers for services provided in 2018. July 2, 2019 Write off the remaining amounts owed from services provided in 2018. October 19, 2019 Receive $42,500 from customers for services provided in 2019. December 31, 2019 Estimate that 45% of accounts receivable at the end of the year will not be received.

Required:

1. Record transactions for each date.

2. Post transactions to the following accounts: Cash, Accounts Receivable, and Allowance for Uncollectible Accounts.

3. Calculate the net realizable value of accounts receivable at the end of 2018 and 2019

Answer 1

Solution 1:

Journal Entries- 2018
Date	Account Name	Debit	Credit
12-Jun	Accounts receivable Dr	$38,000
	To Service revenue		$38,000
17-Sep	Cash Dr	$22,500
	To Accounts receivable		$22,500
31-Dec	Bad debt expense Dr [($38000-22500)*45%]	$6,975
	To Allowance for doubtful accounts		$6,975

Journal Entries- 2019
Date	Account Name	Debit	Credit
04-Mar	Accounts receivable Dr	$53,000
	To Service revenue		$53,000
20-May	Cash Dr	$10,000
	To Accounts receivable		$10,000
02-Jul	Allowance for doubtful accounts Dr ($38000-22500-$10000)	$5,500
	To Accounts receivable		$5,500
19-Oct	Cash Dr	$42,500
	To Accounts receivable		$42,500
31-Dec	Bad debt expense Dr [($53000-42500)*45%]	$4,725
	To Allowance for doubtful accounts		$4,725

Solution 2:

Cash
17-Sep-18	$22,500
20-May-19	$10,000
19-Oct-19	$42,500
Ending Balance	$75,000

Accounts Receivable
12-Jun-18	$38,000	17-Sep-18	$22,500
04-May-19	$53,000	20-May-19	$10,000
		02-Jul-19	$5,500
		19-Oct-19	$42,500
Ending Balance	$10,500

Allowance for Doubtful Debts
02-Jul-19	$5,500	31-Dec-18	$6,975
		31-Dec-19	$4,725
		Ending Balance	$6,200

Solution 3:

Net Realizable Value of accounts receivable at the end of 2018 = $15500- $6975 = $8,525

Net Realizable Value of accounts receivable at the end of 2019 = $10500 - $6200 = $4,300