ACCTG 2600 Lecture Notes - Lecture 9: Income Statement, Accounts Receivable, Matching Principle

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erinmanatee680

10 Apr 2017

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A receivable arising from the sale of goods or services with a verbal promise to pay. Accounts that add up to total accounts receivable. Recognition of bad debts at the point where they will no longer pay. 2/10, net/30= you get 2% off if you pay in 10 days, otherwise you need to pay in. When a company pays you in 9 days, you debit cash 490/discounts 10, and ar credit 500. Deficiencies of the direct write off method. By ignoring the possibility that not all of its outstanding accounts receivable will be collected. By ignoring the possibility of bad debts on sales made during 2016, Roberts has violated its matching principle and has overstated net income for 2016 by ignoring debts as expense. You only hit bad debt expense once when you establish your allowance, until the next year. A contra-asset account: reduce amounts receivable to its net realizable value. Answer: debit ar: 600,000 credit sales: 600,000.

Related Questions

The ledger of Sairu Company at the end of the current year shows Accounts Receivable $195,000, Sales Revenue $1,800,000, and Sales Returns and Allowances $60,000.

Instructions:

(a) If Sairu uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Sairu determines that Mashfi's $2,500 balance is uncollectible.

(b) If Allowance for Doubtful Accounts has a credit balance of $3,500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 9% of accounts receivable.

(c) If Allowance for Doubtful Accounts has a debit balance of $590 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 7% of accounts receivable.

peachturtle861

Raintree Cosmetic Company sells its products to customers on a credit basis. An adjusting entry for bad debt expense is recorded only at December 31, the companyâs fiscal year-end. The 2017 balance sheet disclosed the following: Current assets: Receivables, net of allowance for uncollectible accounts of $48,000 $ 522,000 During 2018, credit sales were $1,840,000, cash collections from customers $1,920,000, and $57,000 in accounts receivable were written off. In addition, $4,800 was collected from a customer whose account was written off in 2017. An aging of accounts receivable at December 31, 2018, reveals the following: Percentage of Year-End Percent Age Group Receivables in Group Uncollectible 0â60 days 70 % 5 % 61â90 days 20 15 91â120 days 5 20 Over 120 days 5 40 Required: 1. Prepare summary journal entries to account for the 2018 write-offs and the collection of the receivable previously written off. 2. Prepare the year-end adjusting entry for bad debts according to each of the following situations: Bad debt expense is estimated to be 4% of credit sales for the year. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is estimated to be 10% of the year-end balance in accounts receivable. Bad debt expense is estimated by computing net realizable value of the receivables. The allowance for uncollectible accounts is determined by an aging of accounts receivable. 3. For situations (a)â(c) in requirement 2 above, what would be the net amount of accounts receivable reported in the 2018 balance sheet?

pinkantelope545

On December 31, the unadjusted trial balance of Leeâs CoffeeDistributor contains the following:

	Debit	Credit
Accounts Receivable	240,000
Allowance for Doubtful Accounts		3,000
Cash Sales		1,500,000
Credit Sales		950,000

The A/R subsidiary ledger yields the following aging [terms are1/10, n/30] and subsequent analysis:

Total	Current	1-30 days past due	31-60 days past due	61-90 days past due	More than 90 days past due
$240,000	110,000	60,000	30,000	10,000	30,000
Write-off percentage	1.50%	4.00%	7.00%	10.00%	25.00%
Estimated write-off

Assume that instead of the A/R aging method [% of receivablesapproach], Lee's Coffee Distributors uses the % of credit salesapproach with respect to the allowance method for bad debts, andthe prior 5 year history through December 31 of the current yearshows write-offs have averaged 1.5% of credit sales. Which one ofthe following statements is correct (true) as of December 31 of thecurrent yea

On December 31, the unadjusted trial balance of Leeâs CoffeeDistributor contains the following:

	Debit	Credit
Accounts Receivable	240,000
Allowance for Doubtful Accounts		3,000
Cash Sales		1,500,000
Credit Sales		950,000

The A/R subsidiary ledger yields the following aging [terms are1/10, n/30] and subsequent analysis:

Total	Current	1-30 days past due	31-60 days past due	61-90 days past due	More than 90 days past due
$240,000	110,000	60,000	30,000	10,000	30,000
Write-off percentage	1.50%	4.00%	7.00%	10.00%	25.00%
Estimated write-off

A. The net A/R reported on the balance sheet would be$225,750

B. The AJE made would include a debit to "bad debt expense" for$11,250

C. The write-off % of 1.5% used for the current year AJE issmaller than the write-off % used to make the prior year AJE.

D. The AJE made would be included as an "outflow of cash" in theoperating activities section of the statement of cash flows.

tantortoise158

ACCTG 2600 Lecture Notes - Lecture 9: Income Statement, Accounts Receivable, Matching Principle

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