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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Examination of Accounts Receivable You are engaged in the annual examination of Faulane Company, a wholesale office supply business, for the year ended June 30, 2019. You have been assigned to examine the accounts receivable. The following, information is available at June 30, 2019.

  1. 1. Your review of accounts receivable and discussions with the client disclose that the following items are included in the accounts receivable (of both the control and the subsidiary ledgers):
    1. a. Accounts with credit balances, representing customer advances, total $1,900
    2. b. Receivables from officers total $5,300
    3. c. Advances to employees total $1,250
    4. d. Accounts that are definitely uncollectible total $1,120
  2. 2. Uncollectible accounts are estimated to be 0.50% of the year’s net credit sales of $18,125,000.

Required:

Prepare any journal entry (entries) required to:

  1. 1. reclassify items that are not trade accounts receivable
  2. 2. write off uncollectible accounts
  3. 3. adjust the allow ance for doubtful accounts

To determine

Prepare journal entry to record the give transaction.

Explanation

Account receivable:

The amount of money to be received by a company for the sale of goods and services to the customers is referred to as account receivable.

1. Prepare journal entry to record to reclassify items that are not trade accounts receivable.

DateAccount Titles and explanationDebit ($)Credit ($)
June 30Receivables from officers5,300 
 Advance to employees1,250 
      Accounts receivable 4,650
      Customer advances 1,900
 (To reclassify the nontrade accounts receivable and credit  balance in customers  account)  

Table (1)

  • Receivable from officers is an asset and there is an increase in the value of an asset. Hence, debit the receivables from officers by $5,300.
  • Advance to employees is an asset and there is an increase in the value of an asset. Hence, debit the advance to employees by $1,250.
  • Accounts receivable is an asset and there is a decrease in the value of asset. Hence, credit the accounts receivable by $4,650.
  • Customer advance is an asset and there is a decrease in the value of asset. Hence, credit the customer advance by $1,900.

2. Prepare journal entry to record to write off uncollectible accounts...

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