Question

During Burns Company's first year of operations, credit sales totaled $140,000 and collections on credit sales totaled $105,000. Burns estimates that bad debt losses amount to 1.5% of account receivables. By year-end, Burns had written off $300 of specific accounts as uncollectible. 

Required: 

1.Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense.

2. Show the year-end Statement of Financial Position presentation for accounts receivable.

Answer 1

Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expenses.

Burns estimates that bad debt losses will be 1.5% of credit sales. If you're using the percentage of credit sales method, you ignore the existing balance in the AUA account.

Accounts and Explanations	Debit	Credit
Bad debt expense 2,100($140,000 xx1.5%)	2,100
Allowance for uncollectible accounts		2,100
(To record the allowance for the uncollectable)
Allowance for uncollectible accounts	300
Accounts receivable		300
( To record the write off of uncollectable)

Show the year-end balance sheet presentation for accounts receivable.

Accounts receivable 34,700(35,000-300)

less Allowance for uncollectible accounts 1,800(2,100-300)

Net Accounts receivable $32,900.