At the beginning of 2009, Pental Company had the following balances: A/R = $122,

Question

At the beginning of 2009, Pental Company had the following balances:
A/R = $122,000
Allowance for Uncollectible Accounts = $7,900

During 2009, their credit sales were $1,173,000 and collections on A/R were $1,150,000. The following additional transactions occured during the year:

Feb 17, wrote off XXX Account, $3,600
May 28, wrote off YYYAccount, $2,400
Dec 15, wrote off ZZZ Account, $900
Dec 31, recorded bad debts expense assuming that Penman's poilcy is to record bad debts expense at 0.8% of credit sales (hint: the allowance account is increased by 0.8% of credit sales regardless of write-offs.)

COMPUTE THE ENDING BALANCES IN A/R AND THE ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS. SHOW HOW PENTAL'S DEC 31, 2009 BALANCE SHEET REPORTS THE TWO ACCOUNTS.

Explanation / Answer

2009 Beginning Balance

A/R 122,000

Allowance 7,900

2009 Ending Balance

A/R 122,000 + 1,173,000(credit sales) - 1,150,000(collection) - (3,600 + 2,400 + 900)(bad debt write-off) = 138,100

Allowance 7,900 - (3,600 + 2,400 + 900) + 1,173,000*0.8%(bad debt expense) = 10,384

Balance Sheet
Account Receivable 138,100
Less: Allowance for uncollectible accounts (10,384) 127,716

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