Accounting for uncollectible accounts using the allowance method (percentage of sales), and reporting receivables on the balance sheet [20-30 min]
Quality Watches completed the following selected transactions during 2012 and 2013:
2012 | |
Dec 31 | Estimated that uncollectible account expense for the year was 2% of credit sales of $450,000 and recorded that amount as expense. Use the allowance method. |
31 | Made the closing entry for uncollectible account expense. |
2013 | |
Jan 17 | Sold inventory to Malcom Monet, $700, on account. Ignore cost of goods sold. |
Jun 29 | Wrote off Malcom Monet’s account as uncollectible after repeated efforts to collect from him. |
Aug 6 | Received $700 from Malcom Monet, along with a letter apologizing for being so late. Reinstated Monet’s account in full and recorded the cash receipt. |
Dec 31 | Made a compound entry to write off the following accounts as uncollectible: Brian Kemper, $1,600; May Milford, $1,000; and Ronald Richter, $400. |
31 | Estimated that uncollectible account expense for the year was 2% on credit sales of $460,000 and recorded the expense. |
31 | Made the closing entry for uncollectible account expense. |
Requirements
1. Open T-accounts for Allowance for uncollectible accounts and Uncollectible account expense. Keep running balances, assuming all accounts begin with a zero balance.
2. Record the transactions in the general journal, and post to the two T-accounts.
3. Assume the December 31, 2013, balance of Accounts receivable is $135,000. Show how net Accounts receivable would be reported on the balance sheet at that date. Use the three line format of reporting the net accounts receivable.
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