At December 31, 2017, Hawke Company reports the following results for its calendar year.
Cash sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,905,000
Credit sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,682,000
In addition, its unadjusted trial balance includes the following items.
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . $1,270,100 debit
Allowance for doubtful accounts . . . . . . . . . . . . . 16,580 debit
2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2017, balance sheet given the facts in part 1a
The amount of accounts receivables and the allowance for doubtful accounts will appear on the assets side of the organization’s balance sheet under the head of current assets.
When a business entity sells goods on credit, and the amount is due from the customers to the business, that particular amount is termed as accounts receivables.
|Less: Allowance for doubtful accounts||68,65|
Prepare journal entries for the following selected transactions of Danica Company for 2016. 2016
Dec. 13 Accepted a $9,500, 45-day, 8% note dated December 13 in granting Miranda Lee a time extension on her past-due account receivable.
31 Prepared an adjusting entry to record the accrued interest on the Lee note.
Archer Co. allows select customers to make purchases on credit. Its other customers can use either of two credit cards: Commerce Bank or Goldman. Commerce Bank deducts a 3% service charge for sales on its credit card. When customers use the Goldman card, a 2% service charge is deducted from sales on its card. Archer completed the following transactions in August.
Aug. 4 Sold $3,700 of merchandise on credit (that had cost $2,000) to McKenzie Carpenter.
10 Sold $5,200 of merchandise (that had cost $2,800) to customers who used their Commerce Bank credit cards.
11 Sold $1,250 of merchandise (that had cost $900) to customers who used their Goldman cards.
14 Received Carpenter’s check in full payment for the purchase of August 4.
15 Sold $3,250 of merchandise (that had cost $1,758) to customers who used their Goldman cards.
22 Wrote off the account of Craw Co. against the Allowance for Doubtful Accounts. The $498 balance in Craw Co.’s account stemmed from a credit sale in November of last year.
Prepare journal entries to record the preceding transactions and events. (The company uses the perpetual inventory system. Round amounts to the nearest dollar.)
Santana Rey, owner of Business Solutions, realizes that she needs to begin accounting for bad debts expense. Assume that Business Solutions has total revenues of $44,000 during the first three months of 2018 and that the Accounts Receivable balance on March 31, 2018, is $22,867.
1. Prepare the adjusting entry needed for Business Solutions to recognize bad debts expense on March 31, 2018, under each of the following independent assumptions (assume a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31).
a. Bad debts are estimated to be 1% of total revenues. (Round amounts to the dollar.)
b. Bad debts are estimated to be 2% of accounts receivable. (Round amounts to the dollar.)
2. Assume that Business Solutions’s Accounts Receivable balance at June 30, 2018, is $20,250 and that one account of $100 has been written off against the Allowance for Doubtful Accounts since March 31, 2018. If S. Rey uses the method prescribed in part 1b, what adjusting journal entry must be made to recognize bad debts expense on June 30, 2018?
3. Should S. Rey consider adopting the direct write-off method of accounting for bad debts expense rather than one of the allowance methods considered in part 1? Explain
Warner Company’s year-end unadjusted trial balance shows accounts receivable of $99,000, allowance for doubtful accounts of $600 (credit), and sales of $280,000. Uncollectibles are estimated to be 1.5% of accounts receivable.
2. What amount would have been used in the year-end adjusting entry if the allowance account had a year-end unadjusted debit balance of $300?
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