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QuestionAllowance method: Income statement and ba

14 May QuestionAllowance method: Income statement and ba

Posted at 16:15h in 2General studies by
Question
  1. 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

  1. Prepare journal entries to
    record the sales- and receivables-related trans­actions from 19X3.
  2. Prepare the December 31,
    19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles
    are estimated to be 2% of net credit sales.
  3. Prepare the December 31,
    19X3, adjusting entry for uncollectible ac­counts assuming that uncollectibles
    are estimated at 1% of year-end accounts receivable.
  4. 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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