(Learning Objectives 1, 2, 3, 4, 5: Account for and evaluate accounts receivableincluding returns, sales discounts, and uncollectible accounts) The balance sheet of Aqua,Inc., a world leader in the design and sale of telescopic equipment, reported the followinginformation on its balance sheets for 2018 and 2017 (figures are in thousands):$8,300(In thousands) December 31, 2018$8,560December 31, 2017Accounts receivable (net of allowance of $1,080 and $940,respectively)In 2018, Aqua recorded $15,700 (gross) in sales (all on account), of which $700 (gross) wasreturned for credit. The cost of sales was $7,700; the cost of the merchandise returned was $400.Aqua offers its customers credit terms of 2/10, n/30. Ninety percent of collections on accountsreceivable were made within the discount period. Aqua wrote off uncollectible accounts receivablein the amount of $120 (gross) during 2018. Sales returns are estimated to be 4% of sales.Requirements1. Calculate the amount of uncollectible accounts expense recorded by Aqua in 2018.2. Calculate Aqua’s cash collections from customers in 2018.3. Open T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts. Enterthe beginning balances into each of these accounts. Prepare summary journal entries to recordthe transactions and post the transactions to the T-accounts for the following for 2018:a. Sales revenueb. Cost of goods soldc. Estimated returns inventoryd. Cost of estimated returnse. Merchandise returnedf. Cost of merchandise returnedg. Collectionsh. Write-offs of uncollectible accountsi. Uncollectible-accounts expense
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.
(Learning Objectives 1, 2, 3, 4, 5: Account for and evaluate
including returns, sales discounts, and uncollectible accounts) The balance sheet of Aqua,
Inc., a world leader in the design and sale of telescopic equipment, reported the following
information on its balance sheets for 2018 and 2017 (figures are in thousands):
$8,300
(In thousands) December 31, 2018
$8,560
December 31, 2017
Accounts receivable (net of allowance of $1,080 and $940,
respectively)
In 2018, Aqua recorded $15,700 (gross) in sales (all on account), of which $700 (gross) was
returned for credit. The cost of sales was $7,700; the cost of the merchandise returned was $400.
Aqua offers its customers credit terms of 2/10, n/30. Ninety percent of collections on accounts
receivable were made within the discount period. Aqua wrote off uncollectible accounts receivable
in the amount of $120 (gross) during 2018. Sales returns are estimated to be 4% of sales.
Requirements
1. Calculate the amount of uncollectible accounts expense recorded by Aqua in 2018.
2. Calculate Aqua’s cash collections from customers in 2018.
3. Open T-accounts for Accounts Receivable and Allowance for Uncollectible Accounts. Enter
the beginning balances into each of these accounts. Prepare summary
the
a. Sales revenue
b. Cost of goods sold
c. Estimated returns inventory
d. Cost of estimated returns
e. Merchandise returned
f. Cost of merchandise returned
g. Collections
h. Write-offs of uncollectible accounts
i. Uncollectible-accounts expense
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