Presented below is information related to the Accounts Receivable accounts of Gulistan Inc. during the current year 2020. 1. An aging schedule of the accounts receivable as of December 31, 2020, is as follows. Age Net Debit Balance % to Be Applied afterCorrection Is Made Under 60 days $172,342 1% 60–90 days 136,490 3% 91–120 days 39,924* 6% Over 120 days 23,644 $3,700 definitely uncollectible;estimated remainderuncollectible is 25% $372,400 *The $3,240 write-off of receivables is related to the 91-to-120 day category. 2. The Accounts Receivable control account has a debit balance of $372,400 on December 31, 2020. 3. Two entries were made in the Bad Debt Expense account during the year: (1) a debit on December 31 for the amount credited to Allowance for Doubtful Accounts, and (2) a credit for $3,240 on November 3, 2020, and a debit to Allowance for Doubtful Accounts because of a bankruptcy. 4. Allowance for Doubtful Accounts is as follows for 2020. Allowance for Doubtful Accounts Nov. 3 Uncollectible accounts Jan. 1 Beginning balance 8,750 written off 3,240 Dec. 31 5% of $372,400 18,620 5. A credit balance exists in Accounts Receivable (60–90 days) of $4,840, which represents an advance on a sales contract. Instructions Assuming that the books have not been closed for 2020, make the necessary correcting entries.
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.
Presented below is information related to the
1. An aging schedule of the accounts receivable as of December 31, 2020, is as follows.
| Age | Net Debit Balance | % to Be Applied after Correction Is Made |
||
| Under 60 days | $172,342 | 1% | ||
| 60–90 days | 136,490 | 3% | ||
| 91–120 days | 39,924* | 6% | ||
| Over 120 days | 23,644 | $3,700 definitely uncollectible; estimated remainder uncollectible is 25% |
||
| $372,400 | ||||
|
*The $3,240 write-off of receivables is related to the 91-to-120 day category. |
2. The Accounts Receivable control account has a debit balance of $372,400 on December 31, 2020.
3. Two entries were made in the
4. Allowance for Doubtful Accounts is as follows for 2020.
| Allowance for Doubtful Accounts | |||||||||
| Nov. 3 | Uncollectible accounts | Jan. 1 | Beginning balance | 8,750 | |||||
| written off | 3,240 | Dec. 31 | 5% of $372,400 | 18,620 |
5. A credit balance exists in Accounts Receivable (60–90 days) of $4,840, which represents an advance on a sales contract.
Instructions
Assuming that the books have not been closed for 2020, make the necessary correcting entries.
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