A. ACCOUNTS RECEIVABLE—UNCOLLECTIBLE ACCOUNTS Instructions Present the journal e
ID: 2435762 • Letter: A
Question
A. ACCOUNTS RECEIVABLE—UNCOLLECTIBLE ACCOUNTSInstructions
Present the journal entries specified below; show supporting calculations. Each item should be considered independently.
The trial balance of Brinkly Company at December 31, 2007, includes the following:
Debits Credits
Accounts Receivable 100,000
Allowance for Doubtful Accounts 500
Sales (all on credit) 800,000
(1) If Brinkly uses the aging method and estimates that $5,000 of receivables will be uncollectible, prepare the adjusting entry.
(2) If Brinkly estimates uncollectibles at 5% of accounts receivable and the allowance account had a $500 credit balance instead of a $500 debit balance, prepare the appropriate adjusting entry.
(3) Assume that on February 10, 2008, the specific account of Laura Ames with a balance of $400, is deemed uncollectible. Record the write-off.
(4) Assume that on May 12, 2008, Ames pays the above balance in full. Record the appropriate entries.
B. SALE OF ACCOUNTS RECEIVABLE
Instructions
Present the journal entries specified below.
(1) Binger Company sells $200,000 of accounts receivable to Local Factors Inc. for cash less a 3.5% service charge. Record the sale.
(2) Binger Company sold merchandise for $4,000 and accepted the customer’s VISA card. VISA charges a 3% service charge. Record the sale.
Explanation / Answer
Assuming as follows :
==================
Accounts Receivables Debit $100,000
Allowance for Doubtful Accounts Debit $500
Sales Credit $800,000
_______________________________________________________
1) If Brinkly uses the aging method and estimates that $5,000 of receivables will be uncollectible, prepare the adjusting entry.
Bad debt expense $5,500
Allowance for Doubtful Accounts $5,500
Current estimation of uncollectible accounts plus
debit balance in Allowance for Doubtful Accounts
due to less provision made in previous year.
_____________________________________________
(2) If Brinkly estimates uncollectibles at 5% of accounts receivable and the allowance account had a $500 credit balance instead of a $500 debit balance, prepare the appropriate adjusting entry.
Bad debt expense $4,500
Allowance for Doubtful Accounts $4,500
Current estimation of uncollectible accounts less
$500 already in Allowance for Doubtful Accounts.
________________________________________________
(3) Assume that on February 10, 2008, the specific account of Laura Ames with a balance of $400, is deemed uncollectible. Record the write-off
Allowance for Doubtful Accounts $400
Accounts Receivables - Laura Ames $400
Laura Ames accounts written off.
____________________________________________________
(4) Assume that on May 12, 2008, Ames pays the above balance in full. Record the appropriate entries.
Accounts Receivables - Laura Ames $400
Allowance for Doubtful Accounts $400
To reverse previous write off
Cash $400
Accounts Receivables - Laura Ames $400
Cash received from Laura Ames
_____________________________________________
Binger Company sells $200,000 of accounts receivable to Local Factors Inc. for cash less a 3.5% service charge. Record the saCompany sells $200,000 of accounts receivable to Local Factors Inc. for cash less a 3.5% service charge. Record the sale.
Cash $193,000
Service Charges $7,000
Accounts Receivables $200,000
___________________________________________________
(2) Binger Company sold merchandise for $4,000 and accepted the customer’s VISA card. VISA charges a 3% service charge. Record the sale.
Cash $3,880
Credit Card Expense $120
Sales $4,000
_______________________________________________________
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