The credit manager of Shell Fuel has gathered the following information about the company’saccounts receivable and credit losses during the current year:     Dr                    Cr Net credit sales for the year Rs  800,000 Accounts receivable at year-end 175,000 Uncollectible accounts receivable: Actually written off during the year   Rs 96000 Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule)     84000             180,000   Prepare journal entry summarizing the recognition of uncollectible accounts expense for theentire year under each of the following independent assumptions:   Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance forDoubtful Accounts to the amount indicated in the year-end aging schedule. The balance in theallowance account at the beginning of the current year was Rs 25,000. (Consider the effect ofthe write-offs during the year on the balance in the Allowance for Doubtful Accounts.) c. The company uses the direct write-off method of accounting for uncollectible accounts

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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The credit manager of Shell Fuel has gathered the following information about the company’saccounts receivable and credit losses during the current year:

 

 

Dr                    Cr

Net credit sales for the year

Rs  800,000

Accounts receivable at year-end

175,000

Uncollectible accounts receivable:

Actually written off during the year

 

Rs 96000

Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule)

 

 

84000             180,000

 

Prepare journal entry summarizing the recognition of uncollectible accounts expense for theentire year under each of the following independent assumptions:

 

  1. Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales.
  2. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance forDoubtful Accounts to the amount indicated in the year-end aging schedule. The balance in theallowance account at the beginning of the current year was Rs 25,000. (Consider the effect ofthe write-offs during the year on the balance in the Allowance for Doubtful Accounts.)

c. The company uses the direct write-off method of accounting for uncollectible accounts

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