Question

On August 31, 2018, Melrose Floral Supply had a $170,000 debit balance in Accounts Receivable and a $6,800 Credit balance in Allowance for Bad Debts. During September, Melrose made: + Sales on account. $560.000. Ignore Cost of Goods Sold. • Collections on account, $598,000 • Write-offs of uncollectible receivables, $8,000 Read the requirements Requirement 1. Journalize all September entries using the allowance method. Bad Debts Expense was estimated at 2% of credit sales. Show all September activity in Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense (post to these T-accounts) Begin by journalizing all September entries using the allowance method. (Record debits first, then credits. Select the explanation on the last line of the journal entry table) Sales on account, $560,000. Ignore Cost of Goods Sold. Date Accounts and Explanation Debit Credit Sep 30 Accounts Receivable 560.000 Collections on account, $598,000 Date Accounts and Explanation Credit Sep. 30 Write-off's of uncollectible receivables. $8.000 Date Accounts and Explanation Sep. 30 Debit Credit Journalize the Bad Debts Expense for September using the allowance method. Bad Debts Expense was estimated at 2% of credit sales Date Accounts and Explanation Debit Credit Sep 30 Post all September entries in the appropriate T-accounts and calculate the ending balance in each account. (Enter the beginning balance of applicable. The post the transactions and calculate the account balance at September 30, 2018.) Accounts Receivable Allowance for Bad Debts

Answer 1

1.

Credit Date Sept. 30 Account title Accounts receivable Sales revenue Debit 560,000 560,000 Sept. 30 598,000 Cash Accounts receivable 598,000 Sept. 30 8,000 Allowance for bad debts Accounts receivable 8,000 11,200 Sept. 30 Bad debt expense (560,000x2%) Allowance for bad debts 11,200

Accounts receivable 170,000 598,000 Cash collection 560,000 8,000 Write off 124,000 Allowance for bad debts Write off 8,000 6,800 Bal. 11,200 Bad debts 10,000 End. Bal. End. Bal. Bad debt expense 11,200 Allowance End. Bal. 11,200

2.

Credit Date Sept. 30 Account title Accounts receivable Sales revenue Debit 560,000 560,000 598,000 Sept. 30 Cash Accounts receivable 598,000 8,000 Sept. 30 Bad debt expense Accounts receivable 8,000

Bal. Sales End. Bal. Accounts receivable 170,000 598,000 Cash collection 560,000 8,000 Write off 124,000 Bad debt expense Write off 8,000 End. Bal. 8,000

3.

Income statement (Partial) Bad debt expense Allowance Direct write method off method 11,200 8,000 Answer for first blank: Allowance method Answer for second blank: According to/based on matching principle

4.

Balance sheet (Partial) Accounts receivable Less: Allowance for bad debts Allowance method 124,000 10,000 114,000 Direct write off method 124,000 - 124,000 Answer for first blank: Allowance method Answer for second blank: Expects to collect