Question

ESSAY. Write your answer in the space provided or on a separate sheet of paper. 6) At the end of the current year, Accounts Receivable has a balance of $900,000, the Allowance for Uncollectible Accounts has a debit balance of $1,000 and net credit sales for the year are $3,000,000. The company uses the percent-of-sales method. Its credit department has determined that uncollectible accounts will amount to 2% of credit sales Required: 1. Prepare the year-end adjusting journal entry. Omit the explanation 2. Determine the adjusted balances for Accounts Receivable and the Allowance for Uncollectible Accounts. 3. Determine the net realizable value of accounts receivable at the end of the year. 1 7) Following are key terms relating to notes receivable, as well as a list of definitions. A. Creditor B. Debtor C. Interest D. Maturity date E. Maturity value F. Principal G. Term 1. The amount of money borrowed by the debtor 2 Another term for the lender 3. The cost of borrowing money stated as an annual percentage rate The length of time from when the note was signed to when the note must be paid 5. The maker of the note 6. The date on which the debtor must pay the note 7. The sum of the principal and the interest on the note Required: Place the appropriate letter (A-G) on the line in front of the statement describing the term

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Answer 1

Solution to Q6. Part 1. Journal entries

Date	Accounts & explanation	Amt. Dr $	Amt.Cr $
	Bad debts a/c Dr (3,000,000*2%)	60,000
	To Account for uncollectible a/c		60,000
	(Being bad debt booked)

2. Account receivable balance = 900,000 & Account receivable balance = (1000-60,000) = $ 59,000 cr. 3. Net realisable value = 900,000 - 59,000 = $ 841,000. Solution to Q7.

Item.	Answer
The amt of money borrowed by debtor	Principal
Another term for lender	creditor
The cost of borrowing money stated as annual percentage	Interest
The length of time from when the note was signed till the note was paid	Term
The maker of note	Debtor
The date on which debtor will pay the note	Maturity date
The sum of principal and interest on the note	Maturity value