Concept explainers
Record transactions related to
The following events occur for The Underwood Corporation during 2018 and 2019, its first two years of operations.
June 12, 2018 | Provide services to customers on account for $41,000. |
September 17, 2018 | Receive $25,000 from customers on account. |
December 31, 2018 | Estimate that 45% of accounts receivable at the end of the war will not be received. |
March 4, 2019 | Provide services to customers on account for $56,000. |
May 20, 2019 | Receive $10,000 from customers for services provided in 2018. |
July 2, 2019 | Write off the remaining amounts owed from services provided in 2018. |
October 19, 2019 | Receive $45,000 from customers for services provided in 2019. |
December 31, 2019 | Estimate that 45% of accounts receivable at the end of the year will not be received. |
Required:
1. Record transactions for each date.
2. Post transactions to the following accounts: Cash, Accounts Receivable, and Allowance for Uncollectible Accounts.
3. Calculate the net realizable value of accounts receivable at the end of 2018 and 2019.
1.
To record: The transactions of Company U for each date.
Answer to Problem 5.3AP
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
June 12 ,2018 | Accounts receivable | 41,000 | ||
Service revenue | 41,000 | |||
(To record the service provided on account) | ||||
September 17, 2018 | Cash | 25,000 | ||
Accounts receivable | 25,000 | |||
(To record the receipt of cash on account) | ||||
December 31, 2018 | Bad debt expense (2) | 7,200 | ||
Allowance for uncollectible accounts | 7,200 | |||
(To record the estimation of future bad debts) | ||||
March 4, 2019 | Accounts receivable | 56,000 | ||
Service Revenue | 56,000 | |||
(To record the services provided on account ) | ||||
May 20, 2019 | Cash | 10,000 | ||
Accounts receivable | 10,000 | |||
(To record receipt of cash on account) | ||||
July 2, 2019 | Allowance for uncollectible accounts | 6,000 | ||
Accounts receivable | 6,000 | |||
(To record the writing-off of actual bad debts) | ||||
October 19, 2019 | Cash | 45,000 | ||
Accounts receivable | 45,000 | |||
(To record the receipt of cash from customer on account) | ||||
December 31, 2019 | Bad debt expense (5) | 3,750 | ||
Allowance for uncollectible accounts | 3,750 | |||
(To record the estimation of future bad debts) |
Table (1)
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is reported in the balance sheet.
Working notes:
Calculate Estimate future bad debts On December 31, 2018:
Calculate Estimate future bad debts On December 31, 2019:
2.
To post: Transactions to the following accounts: Cash, Accounts receivable, and Allowance for uncollectible accounts.
Answer to Problem 5.3AP
For 2018:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
September 17, 2018 | Accounts receivable | $25,000 | |||
December 31, 2018 | Balance (Balancing figure) | $25000 |
Table (2)
For 2019:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
January 1, 2019 | Beginning balance | $25,000 | |||
May 20, 2019 | Accounts receivable | $10,000 | |||
October 19, 2019 | Accounts receivable | $45,000 | |||
December 31, 2019 | Balance (balancing figure) | $80,000 |
Table (3)
For 2018:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
June 12, 2018 | Service revenue | $41,000 | September 17, 2018 | Cash | $25000 |
December 31, 2018 | Balance (Balancing figure) | $16,000 |
Table (4)
For 2019:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
March 4, 2019 | Service revenue | $56,000 | May 20, 2019 | Cash | $10,000 |
July 2, 2019 | Allowance for uncollectible accounts | $6,000 | |||
October 19, 2019 | Cash | 45,000 | |||
December 31, 2019 | Balance (balancing figure) | $11,000 |
Table (5)
For 2018:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
December 31, 2018 | Bad debt expense | $7,200 |
Table (6)
For 2019:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
July 2, 2019 | Accounts receivable | $6,000 | December 31, 2019 | Bad debt expense | $3,750 |
December 31, 2019 | Balance (balancing figure) | $4,950 |
Table (7)
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.
3.
To Calculate: The net realizable value of accounts receivable at the end of 2018 and 2019.
Answer to Problem 5.3AP
Calculate the net realizable value of accounts receivable at the end of 2018 and 2019:
Years | 2018 | 2019 |
Total accounts receivable | $16,000 | $11,000 |
Less: Allowance for uncollectible accounts | ($7,200) | ($4,950) |
Net realizable value | $8,800 | $6,050 |
Table (8)
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.
Hence, the net realizable value of Company U for the year 2018 is $8,800 and for the year 2019 is $6,050.
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Chapter 5 Solutions
Financial Accounting - Access
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