Question

The balance sheet of Regal Company on July 31, 2020 showed balances in Accounts Receivable of $625,000 and an Allowance for Doubtful Accounts of $30,500. During the month of August 2020, transactions affecting Accounts Receivable were as follows: a) Sales on account $637,000 b) Cash collections from credit customers 95,000 c) Accounts receivable from Good Company written-off as worthless 8,200 After a careful aging and analysis of all customer accounts on August 31, it was determined that the Allowance for Doubtful Accounts should be adjusted to a balance of $52,400. (note: the company is using the allowance method) 1) Prepare the general journal entries for each of the three above Transactions (a, b,&c). Use the transaction date of August 31, 2020. 2) Prepare the adjusting entry on August 31, 2020 to provide for uncollectible accounts assuming that Regal Company adjusts its accounts at the end of each month. 3) What is the amount of Net Accounts Receivable that should be reported on the Balance Sheet as of August 31, 2020? 4) Assume that on October 31st, two months after the accounts receivable from Good Company had been written-off as worthless, Good Company sent Regal a check for $4,100. Prepare the journal entry to record the recovery and receipt of payment from Good Company Continues on the next page

Answer 1

The above includes 2 questions in it.

Question 1

1) Journal entries for the transactions during August-2020 (Amount in $)

	Date	Particulars	Debit amount	Credit amount
a)	Aug 31, 2020	Accounts Receivable a/c.........Dr	637,000
		To, Sales a/c		637,000
b)	Aug 31, 2020	Cash a/c .....................Dr	95,000
		To, Accounts Receivable		95,000
c)	Aug 31, 2020	Allowance for Doubtful accounts.Dr	8,200
		To, Accounts Receivable		8,200

2)Adjusting entry for uncollectible accounts   (Amount in $)

Allowance as on July 31, 2020	30,500
Less: Accounts written off	(8,200)
Allowance as on Aug 31, 2020 (A)	22,300
Determined balance for Allowance (B)	52,400
Additional allowance to be made B-A	30,100

Journal Entry

Date	Particulars	Debit	Credit
Aug 31, 2020	Bad debts expense a/c...............Dr	30,100
	To, Allowance for Doubtful debts		30,100

3) Net Accounts Receivable as of Aug 31, 2020

Pariculars	Amount in $
Accounts receivable as of July 31, 2020	625,000
Add: Sales on account during August, 2020	637,000
Less: Cash collected from Credit customers	(95,000)
Less: Accounts written off	(8,200)
Accounts Receivable as of Aug 31, 2020	1158,800
Less: Allowance for doubtful accounts	(52,400)
Net Accounts Receivable as of Aug 31, 2020	1106,400

4) Entry for recovery of bad debts (Amount in $)

Date	Pariculars	Debit	Credit
Oct 31, 2020	Accounts Receivable ...........Dr	4,100
	To, Allowance for Doubtful debts		4,100
Oct 31, 2020	Cash/ Bank ...........................Dr	4,100
	To, Accounts Receivable		4,100

Question - 2

Journal Entries in the books of Auto Warehouse co. (Amount in $)

Date	Particulars	Debit	Credit
Jan 24, 2020	Notes Receivable	36,000
	Accounts Receivable		36,000
	(Note accepted from Flack company)
Mar 24, 2020	Cash	36,590
	Notes Receivable		36,000
	Interest Revenue		590
	(Note collected from Flack company)
May 17, 2020	Cash	80,000
	Notes Receivable	40,000
	Sales		120,000
	(Sales to Jhonson Co against cash and note)
Aug 15, 2020	Allowance for bad debts	40,000
	Notes Receivable		40,000
	(Jhonson co. dishonored the note)
Aug 24, 2020	Notes Receivable	90,000
	Sales		90,000
	(Sales to Gold Company against Note)
Nov 24, 2020	Accounts Receivable	91,775
	Notes Receivable		90,000
	Interest Revenue		1,775
	(Note dishonored - Gold Company)
Dec 14, 2020	Cash	92,278
	Accounts Receivable		91,775
	Interest Revenue		503
	(Collection from Gold Company along with interest)