29 Jun Question Allowance method: Income statement and balance sheet approaches.Tempe
QuestionQuestion
Allowance method: Income statement and balance sheet
approaches.Tempe
Allowance method: Income statement and balance sheet
approaches.Tempe
Company reported accounts receivable of $300,000 and an allowance for
uncollectible accounts of $31,000 (credit) on the December 31, 19X2, balance
sheet. The following data pertain to 19X3 activities and operations:
Sales
on account
$2,000,000
Cash
collections from credit customers
1,600,000
Sales
discounts
50,000
Sales
returns & allowances
100,000
Uncollectible
accounts written off
29,000
Collections
on accounts that were previously written off
2,700
Instructions
Prepare journal entries to
record the sales- and receivables-related transactions from 19X3.
Prepare the December 31,
19X3, adjusting entry for uncollectible accounts assuming that uncollectibles
are estimated to be 2% of net credit sales.
Prepare the December 31,
19X3, adjusting entry for uncollectible accounts assuming that uncollectibles
are estimated at 1% of year-end accounts receivable.
Compute the amount of the
adjusting entry in part (c) assuming that $46,000, rather than $29,000, of
accounts were written off in 19X3.
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