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In: Accounting

Selected unadjusted account balances at December 31, 2017, are shown below for Demron Servicing. Account Debit...

Selected unadjusted account balances at December 31, 2017, are shown below for Demron Servicing.

Account Debit Credit
  Accounts receivable $78,000       
  Allowance for doubtful accounts $    1,260      
  Sales (all on credit) 552,000      
  Sales discounts 16,000       


Required:
a. Demron estimates that 2% of net credit sales will prove to be uncollectible. Prepare the adjusting entry required on December 31, 2017, to estimate uncollectible receivables. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)



b. During 2018, credit sales were $716,000 (cost of sales $469,460); sales discounts of $20,000 were taken when accounts receivable of $733,600 were collected; and accounts written off during the year totalled $16,400. Prepare the entries for these transactions. Assume Perpetual inventory system is used. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)



c. Record the adjusting entry required on December 31, 2018, to estimate uncollectible receivables, assuming it is based on 2% of net credit sales.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)



d. Show how accounts receivable would appear on the December 31, 2018, balance sheet.

Solutions

Expert Solution

Journal entries

No Account and explanation debit credit
a Bad debt expense (552000-16000)*2% 10720
Allowance for doubtful accounts 10720
(To record adjusting entry)

Journal entries

no Account and explanation debit credit
b Account receivable 716000
Sales revenue 716000
(To record credit sales)
Cost of goods sold 469460
Inventory 469460
(To record cost of goods sold)
Cash (733600-20000) 713600
Sales discount 20000
Account receivable 733600
(To record collection)
Allowance for doubtful accounts 16400
Account receivable 16400
(To record write off)

Journal entries

No Account and explanation debit credit
c Bad debt expense (716000-20000)*2% 13920
Allowance for doubtful accounts 13920
(To record adjusting entry)

d) Balance sheet presentation

Current assets
Account receivable 44000
Less: Allowance for doubtful accounts (13920-4420) -9500 34500

ekkarill92 answered 1 year ago
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