4. Ace Co. is preparing an aging of its accounts receivable and developing the n

Question

4. Ace Co. is preparing an aging of its accounts receivable and developing the necessary adjusting entries to Accounts Receivable. Additional information is as follows a. Opening AR Balance (1/1/2016) was $100,000 b. New Credit Sales were $400,000. New Cash sales were $600,000 c. Total Collections from all credit sales $420,000 d. Opening allowance balance $6,000 (credit balance) e. At year-end the following occurred i. Determined that $5,000 needed to be written off ii. After adjusting the AR balance, we determined that 10% of the beginning balance still has not been paid and we assume 50% is uncollectible. $30,000 of the receivable is from new credit sales and is assumed uncollectible at a rate of 1%. The remaining balance is older credit sales and the assumed uncollectible rate is 2%. Prepare bad debt journal entry and show the amount of the receivable that would be shown on the balance sheet at 12/31/2016

Explanation / Answer

Openning A/R Balance 100000 Add Credit Sales 400000 Less Cash Collection 420000 Less Written off 5000 AR balance at the end of 2016 75000 % Uncollectible Uncollectible Beginning Balance 10%    10,000.00 50% 1000 New credit sales    30,000.00 1% 300 Older Credit Sales Balance 750000-10000-30000    35,000.00 2% 700 Total Allowance to Be maintained 2000 Journal DR CR Baddebt Expense 1000 Allowance for Doubtfull debt (6000-5000-2000) 1000 Asset Current Assets Account Reecivable 75000 Less Allowance for Doubfull 2000 Net Account Receivable 73000 Asset Current Assets Account Reecivable 75000 Less Allowance for Doubfull 2000 Net Account Receivable 73000

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