Excel Inc. has provided the following information relating to its sales for the past year, which ended December 31, 20x1. Account Debit Estimated % of accounts receivable that will be uncollectable 4% Opening Balances: Jan. 1, 20x1 balance in the allowance for doubtful account (this is before any adjusting entries) $2,000 cr Jan. 1, 20x1 balance in the accounts receivable account $37,000 dr During 20x1: Credit sales (20x1) Write offs of uncollectible accounts receivable (20x1) Collections of previously written off amounts (20x1) Cash received in payment of accounts receivable (20x1) $450,000 $6,200 $900 $426,000 Required - 1) Calculate the balance in the Accounts Receivable account at December 31, 20x1. 2) Calculate the balance in the Allowance for Doubtful Accounts at December 31, 20x1. 3) Prepare any journal entries required at December 31, 20x1 to record bad debt expense for the year.
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.
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For part 2, do "written off" and "previously written off accounts collection" fall under debit or credit?