Accounting for uncollectible accounts using the allowance and reporting accounts receivable on the balance sheet method [25-30 min]
Consider the following January transactions for Shine King Cleaning:
Jan1 | Performed cleaning services for Debbie’s D-list for $8,000 on terms 3/10, n/20. |
3 | Shine King decides to adopt the allowance method. Uncollectible account expense is estimated at 2% of credit sales. |
10 | Borrowed money from North Spot Bank, $10,000, 7% for 180 days. |
12 | After discussions with Pierre’s Wig Stand, Shine King has determined that $225 of the receivable owed will not be collected. Write off this portion of the receivable. |
15 | Sold goods to Watertown for $4,000 on terms 4/10, n/30. Cost of goods sold was $600. |
15 | Recorded uncollectible account expense estimate for Watertown sale. |
28 | Sold goods to Bridget, Inc., for cash of $1,200 (cost $280). |
28 | Collected from Pierre’s Wig Stand $225 of receivable previously written off. Reinstated the remaining balance of Pierre’s receivable. |
29 | Paid cash for utilities of $350. |
31 | Created an aging schedule for Shine King for accounts receivable. Shine King determined that accounts 1-20 days old were 2% uncollectible and accounts over 20 days old were 15% uncollectible. Prepared an aging schedule and adjusted the Allowance for uncollectible accounts to the aging schedule. |
31 | Shine King prepared all other adjusting entries necessary for January. |
Requirements
1. Prepare all required journal entries and post them to Shine King’s ledger.
2. Reconcile the Accounts receivable control account to the Accounts receivable subsidiary ledger.
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