Determine the collections from customers in October and November. Show all compu

Question

Determine the collections from customers in October and November. Show all computations.

The percentage of receivables approach to estimating bad debts expense is used by Hayes Company.

On February 28, the firm had accounts receivable in the amount of $585,000 and Allowance for Doubtful Accounts had a credit balance of $370 before adjustment. Net credit sales for February amounted to $3,000,000. The credit manager estimated that uncollectible accounts would amount to 5% of accounts receivable. On March 10, an accounts receivable from Mark Dole for $2,100 was determined to be uncollectible and written off. However, on March 31, Dole received an inheritance and immediately paid his past due account in full.

(a) Prepare the journal entries made by Hayes Company on the following dates: 1. February 28 2. March 10 3. March 31 (b) Assume no other transactions occurred that affected the allowance account during March. Determine the balance of Allowance for Doubtful Accounts at March 31.

Explanation / Answer

Journal Entry Date Particulars Dr Amount Cr. Amount Feb-28 Bad Debts Exp. A/c                                Dr. $28,880    To Provision for Bad Debts A/c $28,880 (Being the 5% provision made) Mar-10 Bad Debts A/c                                           Dr. $1,995      To Accounts Receivable A/c $1,995 (Mr. Mark Dole accounts receivables become bad debts, written off) Mar-10 Profit & Loss A/c                                    Dr. $2,100    To Bad Debts A/c $2,100 (Mr. Dhole account is written off) Mar-31 Cash A/c                                                   Dr. $2,100    To Bad debts A/c $2,100 (Amount Recd from Mr. Dhole) Working Notes Accounts Receivables as on Feb-28 $585,000 Prov. For Bad debts (5% od $585000) $29,250 Less: Provision already made $370 Provision to be created on Feb-28 $28,880 Answer b. Calculation of Provision for Doubtful Accounts Date Particulars Amount Feb 28 Opening Balance $370 Feb 28 Add: Additional Provision $28,880 Mar-10 Less: Bad Debts - Mr Dhole - W/off ($2,100) Mar-31 Balance on Mar-31 $27,150

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