Question

Brubacher Service Company sells for cash and on account. By selling on credit, Brubacher cannot expect to collect 100% of its accounts receivable. At December 31, 2017, and 2016, respectively, Brubacher reported the following on its balance sheet (in thousands of dollars):

	December 31
	2017	2016
Accounts receivable	$500	$400
Less: Allowance for doubtful accounts	(100)	(60)
Net realizable value of Accounts receivable	$400	$340

During the year ended December 31, 2017, Brubacher earned service revenue and collected cash from customers. Bad debt expense for the year was $335 thousand and Brubacher wrote off uncollectible accounts receivable.

Required:

1. Prepare T-accounts for Accounts Receivable and Allowance for Doubtful Accounts, and insert the December 31, 2016, balances as given.

2. Journalize the following transactions of Brubacher for the year ended December 31, 2017. Explanations are not required.

a. service revenue on account, $6,700 thousand.

b. Collections from customers on account, $6,300 thousand.

c. Bad debt expense, $335 thousand.

d. Write-offs of uncollectible accounts receivable, $300 thousand

e. Recovered an account receivable, $5 thousand

3. Post to the Accounts Receivable and Allowance for Doubtful Accounts T-accounts.

4. Show what Brubacher should report on its income statement for the year ended December 31, 2017.

Answer 1

2. Journalize the transactions: Amounts in'000' 1. & 3. T accounts: Transaction Account Title & Explanation Debit Credit Allowance for doubtful accounts $100 $ 335c. Accounts Receivable 6,700 Beg. Bal Service Revenue 6,700 To record service revenue on account) Cash 300 6,300 End. Bal $ 135 Accounts Receivable 6,300 To record cash received from debtors) Bad debts expense Accounts Receivable Beg, Bal. S 500S 6,300 b $6,700$300 d. 335 Allowance for doubtful accounts 335 End. Bal. $600 To record bad debt expense) Allowance for doubtful accounts Accounts Receivable 300 4. Income Statement To record uncollectible accounts receivable) Cash Burbacher Service Company Income Statement For The Year Ending December 31, 2017 Bad debts recovered To record the bad debts recovered) $ 6,700 Service Revenue Bad debts recovered Bad debts Expense Net income 335) $ 6,370