Concept explainers
Accounting for uncollectible accounts using the allowance method (percent-of-sales) and reporting receivables on the
Beta Watches completed the following selected transactions during 2016 and 2017:
2016 | |
Dec. 31 | Estimated that |
31 | Made the closing entry for bad debts expense. |
2017 | |
Jan. 17 | Sold merchandise inventory to Marty Viller, $900, on account. Ignore Cost of Goods Sold. |
Jun. 29 | Wrote off Marty Viller’s account as uncollectible after repeated efforts to collect from him. |
Aug. 6 | Received $900 from Marty Viller, along with a letter apologizing for being so late. Reinstated Viller’s account in full and recorded the cash receipt. |
Dec. 31 | Made a compound entry to write off t he following accounts as uncollectible: Bob Keffer, $1,900; Mary Martin, $1,000; and Robert Ronson, $400. |
31 | Estimated that bad debts expense for the year was 3% on credit sales of $500,000 and recorded the expense. |
31 | Made the closing entry for bad debts expense. |
Requirements
1. Open T-accounts for Allowance for Bad Debts and Bad Debts Expense. Keep running balances, assuming all accounts begin with a zero balance.
2. Record the transactions in the general journal, and post to the two T-accounts.
3. Assume the December 31, 2017, balance of Accounts Receivable is $131,000. Show how net accounts receivable would be reported on the balance sheet at that date.
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