Question

The credit manager of Montour Fuel has gathered the following information about the company's accounts receivable and credit losses during the current year: $ 7,500,000 1,750,000 Net credit sales for the year Accounts receivable at year-end Uncollectible accounts receivable: Actually written off during the year Estimated portion of year-end receivables expected to prove uncollectible (per aging schedule) $ 98,888 84,000 182,000 a. Uncollectible accounts expense is estimated at an amount equal to 2.5 percent of net credit sales. b. Uncollectible accounts expense is recognized by adjusting the balance in the Allowance for Doubtful Accounts to the amount indicated in the year-end aging schedule. The balance in the allowance account at the beginning of the current year was $25,000. Consider the effect of the write-offs during the year on the balance in the Allowance for Doubtful Accounts.) c. The company uses the direct write-off method of accounting for uncollectible accounts Prepare one journal entry summarizing the recognition of uncollectible accounts expense for the entire year under each of the above independent assumptions. (If no entry is required for a transaction/event, select "No Journal entry required in the first account field.)

Answer 1

	General Journal	Debit	Credit
a	Uncollectible accounts expense	187500		=7500000*2.5%
	Allowance for doubtful accounts		187500
b	Uncollectible accounts expense	157000		=84000+(98000-25000)
	Allowance for doubtful accounts		157000
c	Uncollectible accounts expense	98000
	Accounts receivable		98000