During the year ended December 31, 2015, Kelly\'s Camera Shop had sales revenue
ID: 2562667 • Letter: D
Question
During the year ended December 31, 2015, Kelly's Camera Shop had sales revenue of $170,000, of which $85,000 was on credit. At the start of 2015, Accounts Recoivablo showed a $10,000 dobit balance and the Allowance for Doubtful Accounts showed a $600credit balance. Collections of accounts receivable during 2015 amounted to $68,000 Data during 2015 follow a·On December 10, a customer balance of $1,500 from a prior year was determined to be uncollectible, so it was written off bOn December 31, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2 percent of credit sales for the year Required: 1. Give the required joumal entries for the two events in December. (If no entry is required for a transactionlevent, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet Record the estimated bad debt losses at 2 percent of credit sales for the year. Note: Enter debits before credits Date General Journal Debit Credit Dec 31, 2015 Record ontry Clear entry Vlow general JournalExplanation / Answer
Account Name
Allowances for Doubtful Assets
Accounts Receivable
Bad Debts Expenses (85000*2%)
Allowances for Doubtful Assets
On the basis of above journal entries we will analysis the Accounts:
Accounts Receivble
Account Name
Amount(in $)
Account Name
Amount(in $)
Opening Balance
10,000
Collection
68,000
Credit Sales
85,000
Allowances for Dooubtful Assets
1,500
Closing Balance
25,500
TOTAL
95,000
TOTAL
95,000
Allowances for Doubtful Assets
Account Name
Amount(in $)
Account Name
Amount(in $)
Accounts Receivable
1,500
Opening Balnce
600
Bad Debts Expenses
1,700
Closing Balnce
800
TOTAL
2,300
TOTAL
2,300
Balance Sheet
Liabilities
Amount(in $)
Assets
Amount(in $)
Current Assets
Allowance for Doubtful Assets
800
Accounts Receivable
25,500
Income Statement
Bad Debts Expenses will be charges as expenses in the Income Statement.
No Income and loss will be reported in the income statement for the written of Accounts Receivable because it is covered under the earlier adjusting entries of Allowances for Doubtful Assets.
Reason: Basically, the percentage figure is calculated on the basis of past performance. And past performance indicates that $1500 is uncollectible from the credit sales of $85000 which is (1500*100/85000) 1.76%. Therefore, 2% estimation of Bad Debts Lass is reasonable.
Account Name
Allowances for Doubtful Assets
Accounts Receivable
Bad Debts Expenses (85000*2%)
Allowances for Doubtful Assets
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