(Learning Objective 5: Apply GAAP for uncollectible receivables) The September 30,2019, records of West Point Communications include these accounts:Accounts Receivable.................................... $249,000Allowance for Doubtful Accounts............... (8,000)During the year, West Point Communications estimates Uncollectible-account expense at 1%of credit sales. At year-end (December 31), the company ages its receivables and adjusts thebalance in Allowance for Uncollectible Accounts to correspond to the following aging schedule:LO 5Age of Accounts1–30 Days 31–60 Days 61–90 Days Over 90 Days$132,000 $52,000 $15,000 $36,000Accounts Receivable$235,000Estimated percent uncollectible 0.5% 2% 15% 35%During the last quarter of 2019, the company completed the following selected transactions:Nov 30 Wrote o as uncollectible the $1,200 account receivable fromLooper Carpets and the $800 account receivable from Williams Antiques.Dec 31 Adjusted the Allowance for Uncollectible Accounts and recordeduncollectible-account expense at year-end, based on the aging ofreceivables.Requirements1. Record the transactions for the last quarter of 2019 in the journal. Explanations are not required.2. Prepare a T-account for Allowance for Uncollectible Accounts with the appropriatebeginning balance. Post the entries from requirement 1 to that account.3. Show how West Point Communications will report its accounts receivable in a comparativebalance sheet for 2018 and 2019. (Use the three-line reporting format.) At December 31,2018, the company’s Accounts Receivable balance was $212,000 and the Allowance forUncollectible Accounts stood at $4,800
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
(Learning Objective 5: Apply GAAP for uncollectible receivables) The September 30,
2019, records of West Point Communications include these accounts:
Accounts Receivable.................................... $249,000
Allowance for Doubtful Accounts............... (8,000)
During the year, West Point Communications estimates Uncollectible-account expense at 1%
of credit sales. At year-end (December 31), the company ages its receivables and adjusts the
balance in Allowance for Uncollectible Accounts to correspond to the following aging schedule:
LO 5
Age of Accounts
1–30 Days 31–60 Days 61–90 Days Over 90 Days
$132,000 $52,000 $15,000 $36,000
Accounts Receivable
$235,000
Estimated percent uncollectible 0.5% 2% 15% 35%
During the last quarter of 2019, the company completed the following selected transactions:
Nov 30 Wrote o as uncollectible the $1,200 account receivable from
Looper Carpets and the $800 account receivable from Williams Antiques.
Dec 31 Adjusted the Allowance for Uncollectible Accounts and recorded
uncollectible-account expense at year-end, based on the aging of
receivables.
Requirements
1. Record the transactions for the last quarter of 2019 in the journal. Explanations are not required.
2. Prepare a T-account for Allowance for Uncollectible Accounts with the appropriate
beginning balance.
3. Show how West Point Communications will report its accounts receivable in a comparative
balance sheet for 2018 and 2019. (Use the three-line reporting format.) At December 31,
2018, the company’s Accounts Receivable balance was $212,000 and the Allowance for
Uncollectible Accounts stood at $4,800
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