On June 30, Premier Party Planners had a $35,000 balance in AccountsReceivable and a $2,752 credit balance in Allowance for Uncollectible Accounts. DuringJuly, Premier made credit sales of $193,000. July collections on account were $164,000,and write-offs of uncollectible receivables totaled $2,870. Uncollectible-accounts expense isestimated as 3% of credit sales. No sales returns are expected. Ignore cost of goods sold.Requirements1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible-accountexpense by the allowance method during July. Explanations are not required.2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts,and Net Accounts Receivable at July 31. How much does Premier expect to collect?3. Show how Premier Party Planners will report accounts receivable and net sales on its July31 balance sheet and income statement for the month ended July 31.
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 June 30, Premier Party Planners had a $35,000 balance in Accounts
Receivable and a $2,752 credit balance in Allowance for Uncollectible Accounts. During
July, Premier made credit sales of $193,000. July collections on account were $164,000,
and write-offs of uncollectible receivables totaled $2,870. Uncollectible-accounts expense is
estimated as 3% of credit sales. No sales returns are expected. Ignore cost of goods sold.
Requirements
1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible-account
expense by the allowance method during July. Explanations are not required.
2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts,
and Net Accounts Receivable at July 31. How much does Premier expect to collect?
3. Show how Premier Party Planners will report accounts receivable and net sales on its July
31 balance sheet and income statement for the month ended July 31.
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