During its first year of operations, World Class Sport Shoes earned revenue of $

Question

During its first year of operations, World Class Sport Shoes earned revenue of $388,000 on account. Industry experience suggests that bad debts will amount to 4% of revenues. At December 31, 2012, accounts receivable total $35,000. The company uses the allowance method to account for uncollectibles. Requirements R1. Journalize World Class’ sales and uncollectible-account expense using the percent-of-sales method. R2. Show how to report accounts receivable on the balance sheet at December 31, 2012. Use the long reporting format illustrated in the chapter.

Explanation / Answer

Date Title Debit credit dec 31,2012 Accounts receivable 388,000 sales revenue 388,000 [being sales on account recorded] dec 31,2012 Bad debt expense 15520 Allowance for uncollectible account 15520 [being bad debt expense recorded (388000*.04)] Asset current asset Gross receivables                                                      35000 Less:Allowance for uncollectible account              (15520) Net receivables 19480

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