Stone Furniture Store has credit sales of $400,000 in 2008 and a debit balance o

Question

Stone Furniture Store has credit sales of $400,000 in 2008 and a debit balance of $600 in the Allowance for Doubtful Accounts at year end. As of December 31, 2008, $130,000 of accounts receivable remain uncollected. The credit manager prepared an aging schedule of accounts receivable and estimates that $3,000 will prove to be uncollectible. On March 4, 2009, the credit manager authorizes a write-off of the $1,000 balance owed by A. Lowell. Instructions (a) Prepare the adjusting entry to record the estimated uncollectible accounts expense in 2008. (b) Show the balance sheet presentation of accounts receivable on December 31, 2008. (c) On March 4, before the write-off, assume the balance of Accounts Receivable account is $160,000 and the balance of Allowance for Doubtful Accounts is a credit of $2,000. Make the appropriate entry to record the write-off of the Lowell account. Also show the balance sheet presentation of accounts receivable before and after the write-off.

Explanation / Answer

Journal entries:

A. Baddebt expense debit 3600 ($600 + 3000)

Allowance for Doubtfull accounts credit 3600

B. Accounts receivables $130000

Less Allowance for Doubtfull accs $3000

Balance to be shown in B.sheet $127000

C Allowance for doubtful accounts debit 1000

Accounts receivables by A CREDIT 1000

BALANCE SEET PRESENTATION

Accnts receivables 160000 (before writoff)   

Less allowance for doubtful Accnts 2000   

Balance $ 158000

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