Following are selected transactions of Youth Inc. during December 2016. Dec 1: Youth accepted a one year 8% note receivable from a new customer, GGC. The note is in settlement of an existing $1,500 account receivable. The note plus interest is due on November 30, 2016. Dec 8: An account receivable from JJ in the amount of $700 is determined to be uncollectible and is written off against the Allowance for Doubtful Accounts. Dec 15: Received $200 from one of its clients. Originally this amount was written off as uncollectible since Youth never expected to receive this amount from its client. Additional information for adjusting entries is as follows: An aging of accounts receivable indicates very likely uncollectible accounts totaling $9,000. Prior to the month-end adjustment, the Allowance for Doubtful Accounts had a credit balance of $5,210. Accrued interest revenue on the note receivable from GGC dated December 1, 2016. Prepare the journal entries for December 2016. Prepare the month-end adjustments related to the additional information.
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.
Following are selected transactions of Youth Inc. during December 2016.
Dec 1: Youth accepted a one year 8% note receivable from a new customer, GGC. The note is in settlement of an existing $1,500 account receivable. The note plus interest is due on November 30, 2016.
Dec 8: An account receivable from JJ in the amount of $700 is determined to be uncollectible and is written off against the Allowance for Doubtful Accounts.
Dec 15: Received $200 from one of its clients. Originally this amount was written off as uncollectible since Youth never expected to receive this amount from its client.
Additional information for
- An aging of
accounts receivable indicates very likely uncollectible accounts totaling $9,000. Prior to the month-end adjustment, the Allowance for Doubtful Accounts had a credit balance of $5,210. - Accrued interest revenue on the note receivable from GGC dated December 1, 2016.
- Prepare the
journal entries for December 2016.
- Prepare the month-end adjustments related to the additional information.
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