Concept explainers
Record transactions related to
The following events occur for Morris Engineering during 2018 and 2019, its first two years of operations.
February 2, 2018 Provide services to customers on account for $38,000.
July 23, 2018 Receive $27,000 from customers on account.
December 31, 2018 Estimate that 25% of uncollected accounts will not be received.
April 12, 2019 Provide services to customers on account for $51,000.
June 28, 2019 Receive $6,000 from customers for services provided in 2018.
September 13, 2019 Write off the remaining amounts owed from services provided in 2018.
October 5, 2019 Receive $45,000 from customers for services provided in 2019.
December 31, 2019 Estimate that 25% of uncollected accounts will not be received.
Required:
1. Record transactions for each date.
2. Post transactions to the following accounts: Cash, Accounts Receivable, and Allowance for Uncollectible Accounts.
3. Calculate the net realizable value of accounts receivable at the end of 2018 and 2019.
1.
To record: The transactions of engineering M for each date.
Answer to Problem 5.3BP
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
February 2,2018 | Accounts receivable | 38,000 | ||
Service revenue | 38,000 | |||
( To record the service provided on account) | ||||
July 23,2018 | Cash | 27,000 | ||
Accounts receivable | 27,000 | |||
( To record the receipt of cash on account) | ||||
December 31, 2018 | Bad debt expense (2) | 2,750 | ||
Allowance for uncollectible accounts | 2,750 | |||
( To record the estimation of future bad debts) | ||||
April 12, 2019 | Accounts receivable | 51,000 | ||
Service Revenue | 51,000 | |||
( To record the services provided on account) | ||||
June 28, 2019 | Cash | 6,000 | ||
Accounts receivable | 6,000 | |||
( To record receipt of cash on account) | ||||
September 13, 2019 | Allowance for uncollectible accounts | 5,000 | ||
Accounts receivable | 5,000 | |||
( To record the writing-off of actual bad debts) | ||||
October 5, 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 shown 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 5.3BP
For 2018:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
July 23,2018 | Accounts receivable | $27,000 | |||
December 31, 2018 | Balance (Balancing figure) | $27000 |
Table (2)
For 2019:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
January 1, 2019 | Beginning balance | $27,000 | |||
June 28, 2019 | Accounts receivable | $6,000 | |||
October 5, 2019 | Accounts receivable | $45,000 | |||
December 31, 2019 | Balance (balancing figure) | $78,000 |
Table (3)
For 2018:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
February 2, 2018 | Service revenue | $38,000 | July 23,2018 | Cash | $27000 |
December 31, 2018 | Balance (Balancing figure) | $11,000 |
Table (4)
For 2019:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
April 12, 2019 | Service revenue | $51,000 | June 28, 2019 | Cash | $6,000 |
September 13, 2019 | Allowance for uncollectible accounts | $5,000 | |||
October 5, 2019 | Cash | 45,000 | |||
December 31, 2019 | Balance (balancing figure) | $6,000 |
Table (5)
For 2018:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
December 31, 2018 | Bad debt expense | $2,750 |
Table (6)
For 2019:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
September 13, 2019 | Accounts receivable | $5,000 | December 31, 2019 | Bad debt expense | $3,750 |
December 31, 2019 | Balance (balancing figure) | $1,500 |
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 5.3BP
Calculate the net realizable value of accounts receivable at the end of 2018 and 2019:
Years | 2018 | 2019 |
Total accounts receivable | $11,000 | $6,000 |
Less: Allowance for uncollectible accounts | ($2,750) | ($1,500) |
Net realizable value | $8,250 | $4,500 |
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 Engineering M for the year 2018 is $ 8,250 and for the year 2019 is $ 4,500.
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