Question

Swiss Supplies showed the following selected adjusted balances at its December 31, 2019, year-end: Accounts Receivable Dec. 31/19 Balance 390,000 Allowance for Doubtful Accounts 20,400 Dec. 31/19 Balance During 2020, the following selected transactions occurred: a. Sales totalled $2,780,000, of which 25% were cash sales (cost of sales $1,795,000). b. Sales returns were $118,000, half regarding credit sales. The returned merchandise was scrapped. c. An account for $34,000 was recovered. d. Several accounts were written off: $36,000. e. Collections from credit customers totalled $1,740,000 (excluding the recovery in (c) above). Part A Required: 1. Journalize transactions (a) through (e). You may find it useful to post your entries to T-accounts for Accounts Receivable and Allowance for Doubtful Accounts.

Answer 1

1)

	Date	General Journal	Debit	Credit
a)		Cash (2780000*25%)	695000
		Accounts Receivable	2085000
		Sales		2780000
		Cost of goods sold	1795000
		Inventory		1795000
b)		Sales return	118000
		Accounts receivable		59000
		Cash		59000
c)		Cash	34000
		Accounts receivable		34000
d)		Bad debts	36000
		Accounts receivable		36000
e)		Cash	1740000
		Accounts receivable		1740000

2)

Date	General Journal	Debit	Credit
Dec-31	Bad debt expense	20260
	Allowance for doubtful debts		20260

Net credit sales = 2085000-59000 = 2026000

Allowance for doubtful debts = 2026000*1% = 20260

3)

Partial Balance Sheet
Assets
Current Assets:
Accounts Receivable	606000
Less: Allowance for doubtful debts	20260	585740

Outstanding accounts receivable = 390000+2085000-59000-34000-36000-1740000 = 606000

4) Bad debt expense = 20400 + 20260 + 36000 = 76660

5) Outstanding receivables = 606000*3% = 18180

Date	General Journal	Debit	Credit
Dec-31	Bad debt expense	18180
	Allowance for doubtful debts		18180

6)

Partial Balance Sheet
Assets
Current Assets:
Accounts Receivable	606000
Less: Allowance for doubtful debts	18180	587820

7)

Bad debt expense = 20400 + 18180 +36000 = 74580