Question

1. Prepare t-accounts for cash A/R, the allowance for DA, and income statement

2. Prepare journal entries for each situation

3. Find Net Accounts receivable

A company begins business on 1/1/2019

Information for January:

Credit sales	100,000
Cash collections	80,000

Bad debt expense is 3% of credit sales using the percentage of sales method (total credit sales * estimate percentage).

No accounts were written off.

At the end of January, the company reviews A/R and decides that $4000 of ending A/R will NOT be collectable.

(make the adjusting entry needed to create the allowance balance.)

Answer 1

Accounts Receivable
Sales Revenue	$         1,00,000	$       80,000	Cash
End Bal	$            20,000
Allowance for DA
		$         3,000	Bad Debt Expense
		$         1,000	Bad Debt Expense
		$         4,000	End Bal
Income Statement
Sales Revenue	$         1,00,000
Expenses
Bad Debt Expense	$              4,000

2.

Account Titles	Debit	Credit
Accounts Receivable	$         1,00,000
Sales Revenue		$    1,00,000
Bad Debt Expense	$              3,000
Allowance for DA		$         3,000
Cash	$            80,000
Accounts Receivable		$       80,000
Bad Debt Expense	$              1,000
Allowance for DA		$         1,000

3. Net Accounts Receivable = $20000 - $4000 = $16000