Chapter 9, Problem P9.30APGA

Accounting for uncollectible accounts using the allowance method (percent-of-sales) and reporting receivables on the balance sheet

Learning Objectives 1, 3 2. Net AR $119,800

Delta Watches completed the following selected transactions during 2018 and 2019:

2018 Dec. 31 31 2019 Jan. 17 Jun. 29 Aug. 6 Dec. 31 31 31

Estimated that bad debts expense for the year was 2% of credit sales of $450,000 and recorded that amount as expense. The company uses the allowance method. Made the closing entry for bad debts expense. Sold merchandise inventory to Mack Smith, $400, on account. Ignore Cost of Goods Sold. Wrote off Mack Smith’s account as uncollectible after repeated efforts to collect from him. Received $400 from Mack Smith, along with a letter apologizing for being so late. Reinstated Smith’s account in full and recorded the cash receipt. Made a compound entry to write off the following accounts as uncollectible: Cam Carter, $1,400; Mike Venture, S 1,200; and Russell Reeves. $400. Estimated that bad debts expense for the year was 2% on credit sales of $510,000 and recorded the expense. Made the closing entry for bad debts expense.

Requirements
1. Open T-accounts for Allowance for Bad Debts and Bad Debts Expense, assuming the accounts begin with a zero balance. Record the transactions in the general journal (omit explanations), and post to the two T-accounts.
2. Assume the December 31, 2019, balance of Accounts Receivable is $ 36,000. Show how net accounts receivable would be reported on the balance sheet at that date.