A/R Problem using the Percent of Accounts Receivable Method The A/R Account had

Question

A/R Problem using the Percent of Accounts Receivable Method

The A/R Account had a 45,050 debit balance on Jan 1

The Allowance for doubful accounts had a 4,000 credit balance on Jan 1

Credit Sales Rev reported each month:

225,000-Jan 290,000-Feb

Cash Collections for A/R customers each month:

210,000-Jan   276,350-Feb

Write-offs of uncollecectible accounts in each month were:

3,800-Jan     6,100-Feb

A/R account balances at the end of each month were:

56,250 on Jan 31   63,800 on Feb 28

Assume the this company uses the % of Accounts Receivable Method to estimate its bad debts

The Compnay estimates that the balances of its Allowance account will be 5% of its A/R

1. Prepare the Adj JE for estimated bad debt ex as of Jan 31 and Feb 28

2. Show the T account for the allowance for Doubful Accounts as for Jan and Feb

3.Show the Balance Sheet Presentation for A/R as of Jan 31 and FEb 28

Hint: for 3. the Balance Sheet Presenation must show the net A/R this is the A/R balance less the allowance balance. You must find the ending Allowance in 2.

Explanation / Answer

on 31 jan

Ending Balance of Allowance for Bad Debts A/c 56250* 5% => $2812

-Bad debts expense => ending balnce - credit balnce in allowance for bad ddebts

=> 2812 - 4000 => ($1188)

jouranl entry =>

Allowance for Doubtfull Debts A/c Dr. $1188

TO bad debts Expense A/c cr . $1188

on 28th feb

Ending Balance of Allowance for Bad Debts A/c 63800* 5% => $3190

Bad debts expense => ending balnce + Debit balnce in allowance for bad ddebts

=> 3190 + 1188 => $ 4378

Journal Entry

Bad Debts Expense A/c dr. $4378

To Allowance for doubtful debts A/c cr. $4378

Answer 2

T Account

answer 3

BALANCE SHEET AS ON 31st JAN

Date Description Debit Date Description Credit 31st jan By Bad Debts expense 1188 31st Jan To Balance B/d 4000 31st jan By Balnce C/d 2812 4000 4000 28th Feb By BAlance C/d 6690 1st feb To balance b/d 2812 31st Feb To Bad debts Expense 4378 6690 6690

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