On December 31, 20X1, the company reported a debit balance of $200,000 in accounts receivable and a credit balance of $5,000 in the allowance for doubtful accounts. December 31 is the company’s reporting date. During 20X2, the company had the following transactions: The company made a credit sale of $300,000. The company wrote off the uncollectible accounts for $12,000. The company collected the receivable of $4,000 that had been written off previously. a)Prepare journal entries to record the above three transactions. b)Assume that 1.5% and 2.5% of the company’s 80% and 20% accounts receivable, respectively, cannot be collected, prepare adjusting journal entry at the end of 20X2. c) On January 1, 20X1, the company received a $10,000 three-year note bearing interest at 10% annually. The annual interest is received at each December 31. The market interest rate is 12% annually. September 30 is the company’s reporting date. The company used the effective interest method to account for this long-term note receivable. Cash Received Interest Income Discount Amortized Carrying Amount Jan 1, 20x1 9,520 Dec 31, 20x1 1,000 1,142 142 9,662 Dec 31, 20x2 1,000 1,159 159 9,821 Dec 31, 20x3 1,000 1,179 179 10,000 Prepare journal entries on September 30, 20X2, and December 31, 20X2 (Note: round to the nearest dollar).
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.
On December 31, 20X1, the company reported a debit balance of $200,000 in
- The company made a credit sale of $300,000.
- The company wrote off the uncollectible accounts for $12,000.
- The company collected the receivable of $4,000 that had been written off previously.
a)Prepare journal entries to record the above three transactions.
b)Assume that 1.5% and 2.5% of the company’s 80% and 20% accounts receivable, respectively, cannot be collected, prepare
c)
On January 1, 20X1, the company received a $10,000 three-year note bearing interest at 10% annually. The annual interest is received at each December 31. The market interest rate is 12% annually. September 30 is the company’s reporting date. The company used the effective interest method to account for this long-term note receivable.
Cash Received Interest Income Discount Amortized Carrying Amount
Jan 1, 20x1 9,520
Dec 31, 20x1 1,000 1,142 142 9,662
Dec 31, 20x2 1,000 1,159 159 9,821
Dec 31, 20x3 1,000 1,179 179 10,000
Prepare journal entries on September 30, 20X2, and December 31, 20X2 (Note: round to the nearest dollar).
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