Accounting for uncollectible accounts using the allowance method and reporting receivables on the balance sheet [15-20 min]
At September 30, 2012, Windy Mountain Flagpoles had Accounts receivable of $34,000 and Allowance for uncollectible accounts had a credit balance of $3,000. During October 2012, Windy Mountain Flagpoles recorded the following:
• Sales of $189,000 ($165,000 on account; $24,000 for cash).
• Collections on account, $133,000.
• Uncollectible account expense, estimated as 1% of credit sales.
• Write-offs of uncollectible receivables, $2,800.
Requirements
1. Journalize sales, collections, uncollectible account expense using the allowance method (percent-of-sales method), and write-offs of uncollectibles during October 2012.
2. Prepare T-accounts to show the ending balances in Accounts receivable and Allowance for uncollectible accounts. Compute net accounts receivable at October 31. How much does Windy Mountain expect to collect?
3. Show how Windy Mountain Flagpoles will report net Accounts receivable on its October 31, 2012 balance sheet.
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