Question

1) On June 30, Paisley Party Planners had a $35,000 balance in Accounts Receivable and a $3,252 credit balance in Allowance for Uncollectible Accounts. During July, Paisley made credit sales of $198,000. July collections on account were $169,000, and write-offs of uncollectible receivables totaled $2,890. Uncollectible-accounts expense is estimated as 4% of credit sales. No sales returns are expected. Required Journalize sales, collections, write-offs of uncollectibles, and uncollectible-account expense by the allowance method during July. Explanations are not required. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts, and Net Accounts Receivable at July 31. How much does Paisley expect to collect? Show how Paisley Party Planners will report accounts receivable and net sales on its July 31 balance sheet and income statement for the month ended July 31. IV. 1. 11. If Paisley had used the Direct Write-Off method, what would be the amount of Bad Debt Expense or Uncolllectible Account Expense for the period?

Answer 1

1.

Accounts Receivable a/c Dr	198000
To Sales revenue a/c		198000
(Credit Sales recorded)
Cash a/c Dr	169000
To accounts receivables a/c		169000
(Cash collections recorded)
Allowance for Uncollectible accounts Dr	2890
To accounts receivable a/c		2890
(written off)
Bad debts expense (4%*198000)-(3252-2890)	7558
To Allowance for Uncollectible accounts		7558
(Allowance provided for)

2. Closing balances:

• Accounts Receivable: (35000+198000-169000-2890) = 61110
• Allowance for Uncollectible a/c: 3252-2890+7558 =7920

3.

Sales	198000
Bad Debt expenses	7558
Net Sales	190442

Accounts Receivable	61110
Less: Allowance for Uncollectible accounts	7920
Accounts Receivable (Net)	53190

4. Bad Debt expense actually written off $ 2890 will be debited to accounts receivables.

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