At December 31, 2019, SoundMaster Company reported this information on its balance sheet. Accounts receivable $960,000 Less: Allowance for doubtful accounts 78,000 During 2019, the company had the following transactions related to receivables. 1. Sales on account $3,600,000 2. Sales returns and allowances 150,000 3. Collections of accounts receivable 3,100,000 4. Write-offs of accounts receivable deemed uncollectible 92,000 5. Recovery of bad debts previously written off as uncollectible 28,000 Instructions a) Prepare the journal entries to record each of these five transactions. Assume that no cash discounts were taken on the collections of accounts receivable. (Omit cost of goods sold entries.) b) Enter the January 1, 2019, balances in Accounts Receivable and Allowance for Doubtful Accounts, post the entries to the two accounts (use T-accounts), and determine the balances. c) Prepare the journal entry to record bad debt expense for 2019, assuming that aging the accounts receivable indicates that expected bad debts are $140,000.
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.
At December 31, 2019, SoundMaster Company reported this information
on its
Less: Allowance for doubtful accounts 78,000
During 2019, the company had the following transactions related to receivables.
1. Sales on account $3,600,000
2. Sales returns and allowances 150,000
3. Collections of accounts receivable 3,100,000
4. Write-offs of accounts receivable deemed uncollectible 92,000
5. Recovery of
Instructions
a) Prepare the journal entries to record each of these five transactions. Assume
that no cash discounts were taken on the collections of accounts receivable.
(Omit cost of goods sold entries.)
b) Enter the January 1, 2019, balances in Accounts Receivable and
Allowance for Doubtful Accounts,
(use T-accounts), and determine the balances.
c) Prepare the
that aging the accounts receivable indicates that expected bad debts are
$140,000.
d) Compute the accounts receivable turnover and average collection period.
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