Rainbow Company reported the following balances at the beginning of current year, Accounts receivable 500,000 Allowance for doubtful accounts 20,000 The following transactions took place in the current year. 1. Sales - cash and credit 3,070,000 2. Cash received from credit customers 2,455,000 3. Cash received from credit customers who took advantage of the 3/10,n/30 credit terms (included in no. 2) 1,455,000 4. Accounts receivable written-off as worthless 10,000 5. Cash received from cash customers 470,000 6. Credit memo for sales return and allowances issued to credit customers 55,000 7. Cash refunds to cash customers 10,000 8. Recoveries of accounts written-off, not included in above collections 5,000 Required; a. Prepare journal entries to record the transactions b. Prepare the adjustment for doubtful accounts if the entity provides for doubtful accounts equal to 2% of net credit sales. c. Determine the net realizable value of accounts receivable at year-en
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.
Rainbow Company reported the following balances at the beginning of current year,
Allowance for doubtful accounts 20,000
The following transactions took place in the current year.
1. Sales - cash and credit 3,070,000
2. Cash received from credit customers 2,455,000
3. Cash received from credit customers who took
advantage of the 3/10,n/30 credit terms (included in no. 2) 1,455,000
4. Accounts receivable written-off as worthless 10,000
5. Cash received from cash customers 470,000
6. Credit memo for sales return and allowances issued
to credit customers 55,000
7. Cash refunds to cash customers 10,000
8. Recoveries of accounts written-off, not included in
above collections 5,000
Required;
a. Prepare
b. Prepare the adjustment for doubtful accounts if the entity provides for doubtful accounts equal to 2% of net credit sales.
c. Determine the net realizable value of accounts receivable at year-end.
Trending now
This is a popular solution!
Step by step
Solved in 4 steps
