On December 31, 2017, Extreme Fitness has an adjusted balance of $720,000 in Accounts Receivable. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $50,400. Extreme Fitness uses the direct write-off method. What amount would the company report as its net accounts receivable on December 31, 2017? Prepare the journal entry to write off the accounts on January 2, 2018. Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018? Has net accounts receivable changed from December 31, 2017?
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.
M8-16 (Supplement 8A) Recording Write-Offs and Reporting Accounts Receivable Using the Direct Write-Off Method [LO 8-S1]
On December 31, 2017, Extreme Fitness has an adjusted balance of $720,000 in Accounts Receivable. On January 2, 2018, the company learns that certain customer accounts are not collectible, so management authorizes a write-off of these accounts totaling $50,400. Extreme Fitness uses the direct write-off method.
- What amount would the company report as its net accounts receivable on December 31, 2017?
- Prepare the
journal entry to write off the accounts on January 2, 2018. - Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018? Has net accounts receivable changed from December 31, 2017?
What amount would the company report as its net accounts receivable on December 31, 2017?
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Req B:
Prepare the journal entry to write off the accounts on January 2, 2018. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
- Record the write-off of certain customer accounts which are not collectible totaling $10,000.
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Req C1:
Assuming no other transactions occurred between December 31, 2017, and January 3, 2018, what amount would the company report as its net accounts receivable on January 3, 2018?
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Has net accounts receivable changed from December 31, 2017?
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