You have the following selected account balances from the books of LMT Inc. as of December 31, 2020: Cash $80,000 Sales returns $89,000 FVTOCI investments 223,000 Bank overdraft 9,000 Accounts receivable 780,000 AFDA(Allowance for doubtful accounts) 10,000 (creditbalance) Inventory Sales 440,000 2,120,000 Other Comprehensive Income Retained earnings 40,000cr. 970,000 The company asked you to enter the necessary journal entries and end-of-year adjusting entries which are required for the following accounts: Accounts receivable and AFDA: The current balances of the Accounts receivable and the AFDA accounts ($780,000 and $60,000, respectively) do not include a write-off of an account receivable of $20,000. Prepare the required journal entry. 2. Accounts receivable and AFDA: after recalculating the balances of these two accounts based on (1), you determine that the AFDA ending balance in December 2020 should be 2% of the ending Accounts receivable balance. Prepare the required adjusting entry. 3. FVTOCI investments: These investments were acquired during 2020, and are currently presented at their original cost of $223,000. You determine that the market value on December 31, 2020 is $225,000. Prepare the required adjusting entry. 4. Cash: The current cash balance of $80,000 includes restricted cash of $10,000. The restriction period is from January 1, 2020 to December 31, 2022. Prepare the required journal entry. 5. Bank Overdraft: The bank overdraft of $9,000 is currently presented as a current liability. You determine that the bank overdraft is in National Bank, where LMT Inc. has a chequing account with a positive balance. National Bank has the legal right to offset the accounts against each other. Prepare the required journal entry. 6. Sales: the current amount in the “Sales” account includes a cash advance of $40,000 received from a customer on November 2020. On December 31, 2020, only $10,000 of this amount was earned by LMT Inc.. Prepare the required adjusting entry.
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.
You have the following selected account balances from the books of LMT Inc. as of December 31, 2020:
|
Cash |
$80,000 |
Sales returns |
$89,000 |
|
FVTOCI investments |
223,000 |
Bank overdraft |
9,000 |
|
Accounts receivable |
780,000 |
AFDA(Allowance for doubtful accounts) |
10,000 (creditbalance) |
|
Inventory
Sales |
440,000
2,120,000 |
Other Comprehensive Income |
40,000cr.
970,000 |
The company asked you to enter the necessary journal entries and end-of-year
- Accounts receivable and AFDA: The current balances of the Accounts receivable and the AFDA accounts ($780,000 and $60,000, respectively) do not include a write-off of an account receivable of $20,000. Prepare the required
journal entry .
2. Accounts receivable and AFDA: after recalculating the balances of these two accounts based on (1), you determine that the AFDA ending balance in December 2020 should be 2% of the ending Accounts receivable balance. Prepare the required adjusting entry.
3. FVTOCI investments: These investments were acquired during 2020, and are currently presented at their original cost of $223,000. You determine that the market value on December 31, 2020 is
$225,000. Prepare the required adjusting entry.
4. Cash: The current cash balance of $80,000 includes restricted cash of $10,000. The restriction period is from January 1, 2020 to December 31, 2022. Prepare the required journal entry.
5. Bank Overdraft: The bank overdraft of $9,000 is currently presented as a current liability. You determine that the bank overdraft is in National Bank, where LMT Inc. has a chequing account with a positive balance. National Bank has the legal right to offset the accounts against each other. Prepare the required journal entry.
6. Sales: the current amount in the “Sales” account includes a cash advance of $40,000 received from a customer on November 2020. On December 31, 2020, only $10,000 of this amount was earned by LMT Inc..
Prepare the required adjusting entry.
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