Concept explainers
1.
Prepare the
1.
Explanation of Solution
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
June 12 ,2021 | 41,000 | |||
Service revenue | 41,000 | |||
(To record the service provided on account) | ||||
September 17, 2021 | Cash | 25,000 | ||
Accounts receivable | 25,000 | |||
(To record the receipt of cash on account) | ||||
December 31, 2021 | Bad debt expense (1) | 7,200 | ||
Allowance for uncollectible accounts | 7,200 | |||
(To record the estimation of future | ||||
March 4, 2022 | Accounts receivable | 56,000 | ||
Service Revenue | 56,000 | |||
(To record the services provided on account ) | ||||
May 20, 2022 | Cash | 10,000 | ||
Accounts receivable | 10,000 | |||
(To record receipt of cash on account) | ||||
July 2, 2022 | Allowance for uncollectible accounts | 6,000 | ||
Accounts receivable | 6,000 | |||
(To record the writing-off of actual bad debts) | ||||
October 19, 2022 | Cash | 45,000 | ||
Accounts receivable | 45,000 | |||
(To record the receipt of cash from customer on account) | ||||
December 31, 2022 | Bad debt expense (3) | 3,750 | ||
Allowance for uncollectible accounts | 3,750 | |||
(To record the estimation of future bad debts) |
Table (1)
Working notes:
Calculate Estimate future bad debts On December 31, 2021:
(1)
Calculate the amount of accounts receivable:
(2)
Calculate Estimate future bad debts On December 31, 2022:
(3)
Calculate the amount of accounts receivable:
(4)
Calculate the balance in allowance for uncollectible accounts after written off:
(5)
2.
2.
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the
For 2021:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
September 17, 2021 | Accounts receivable | $25,000 | |||
December 31, 2021 | Balance (Balancing figure) | $25000 |
Table (2)
For 2022:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
January 1, 2022 | Beginning balance | $25,000 | |||
May 20, 2022 | Accounts receivable | $10,000 | |||
October 19, 2022 | Accounts receivable | $45,000 | |||
December 31, 2022 | Balance (balancing figure) | $80,000 |
Table (3)
For 2021:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
June 12, 2021 | Service revenue | $41,000 | September 17, 2021 | Cash | $25000 |
December 31, 2021 | Balance (Balancing figure) | $16,000 |
Table (4)
For 2022:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
March 4, 2022 | Service revenue | $56,000 | May 20, 2022 | Cash | $10,000 |
July 2, 2022 | Allowance for uncollectible accounts | $6,000 | |||
October 19, 2022 | Cash | 45,000 | |||
December 31, 2022 | Balance (balancing figure) | $11,000 |
Table (5)
For 2021:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
December 31, 2021 | Bad debt expense | $7,200 |
Table (6)
For 2022:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
July 2, 2022 | Accounts receivable | $6,000 | December 31, 2022 | Bad debt expense | $3,750 |
December 31, 2022 | Balance (balancing figure) | $4,950 |
Table (7)
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.
3.
Calculate the net realizable value of accounts receivable at the end of 2021 and 2022.
3.
Explanation of Solution
Calculate the net realizable value of accounts receivable at the end of 2021 and 2022:
Years | 2021 | 2022 |
Total accounts receivable | $16,000 | $11,000 |
Less: Allowance for uncollectible accounts | ($7,200) | ($4,950) |
Net realizable value | $8,800 | $6,050 |
Table (8)
Hence, the net realizable value of Company U for the year 2021 is $8,800 and for the year 2022 is $6,050.
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