An inexperienced accountant for Morgan Company made the following incorrect entries. 1.Notes Receivable.......................................21,600 Accounts Receivable.......................................20,000 Interest Revenue..........................................1,600 Facts: Accepted a $20,000, 1 year, 8% note from Joe Wood Company for balance due on account. 2.Accounts Receivable....................................20,000 Sales Revenue ...........................................20,000 Facts: Accepted Visa credit card for $20,000; the service fee is 2%. 3.Allowance for Doubtful Accounts...........................12,300 Notes Receivable..........................................12,000 Interest Revenue..........................................300 Facts:M. Adler dishonored a $12,000, 10%, 3-month note because of bankruptcy. Adler is expected to pay. No interest had been accrued on the note. Instructions Prepare entries to correct Morgan Company's books based on the facts given. Do not reverse out incorrect entries that were recorded above, but rather correct the account balances so that they reflect the proper amounts.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
An inexperienced accountant for Morgan Company made the following incorrect entries.
1.Notes Receivable.......................................21,600
Interest Revenue..........................................1,600
Facts: Accepted a $20,000, 1 year, 8% note from Joe Wood Company for balance due on
account.
2.Accounts Receivable....................................20,000
Sales Revenue ...........................................20,000
Facts: Accepted Visa credit card for $20,000; the service fee is 2%.
3.Allowance for Doubtful Accounts...........................12,300
Notes Receivable..........................................12,000
Interest Revenue..........................................300
Facts:M. Adler dishonored a $12,000, 10%, 3-month note because of bankruptcy. Adler is expected to pay. No interest had been accrued on the note.
Instructions
Prepare entries to correct Morgan Company's books based on the facts given. Do not reverse out incorrect entries that were recorded above, but rather correct the account balances so that they reflect the proper amounts.
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