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Q18E

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Horngren'S Financial And Managerial Accounting
Found in: Page 471

Short Answer

At January 1, 2018, Hilltop Flagpoles had Accounts Receivable of $28,000, and Allowance for Bad Debts had a credit balance of $3,000. During the year, Hilltop Flagpoles recorded the following:

a. Sales of $185,000 ($164,000 on account; $21,000 for cash). Ignore Cost of Goods Sold.

b. Collections on account, $135,000.

c. Write-offs of uncollectible receivables, $2,300.

Requirements

1. Journalize Hilltop’s transactions that occurred during 2018. The company uses the allowance method.

2. Post Hilltop’s transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.

3. Journalize Hilltop’s adjustment to record bad debts expense assuming Hilltop estimates bad debts as 3% of credit sales. Post the adjustment to the appropriate T-accounts.

4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018, balance sheet.

  1. Journal entries are recorded in Step 2.
  2. T accounts are recorded in Step 3.
  3. Journal entry and T account in Step 4.
  4. The balance of net realizable value is $49,780.
See the step by step solution

Step by Step Solution

Step 1: Definition of accounts receivable

The accounts receivable means the amount that is being received by the company. This amount is received from the debtors of the company.

Step 2: (1) Journalizing the transactions

Date

Particulars

Debit

Credit

Accounts Receivables

$164,000

Sales Revenue

$164,000

(Sold goods on account)

Cash

$21,000

Sales Revenue

$21,000

(Being goods sold in cash)

Cash

$135,000

Accounts Receivables

$135,000

(Collected cash on account.)

Allowance for Bad Debts

$2,300

Accounts Receivables

$2,300

(uncollectible receivables written off.)

Step 3: (2) Posting of transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.

Accounts Receivable

Balance

$28,000

$135,000

Sales

Collections

$164,000

$ 2,300

Bal.

$54,700

Allowance for Bad Debts

Write-off

$2,300

Balance

$3,000

Balance

$700

Step 4: (3) Journal entry and T accounts.

Date

Particulars

Debit

Credit

Bad Debts Expense

$4,220

Allowance for Bad Debts

$4,220

(Being entry to record bad debts expense)

Allowance for Bad Debts

Write off

$2,300

Bal.

$3,000

Unadjusted Balance

700

Adjustment

$4,220

Balance

$4,920

Step 5: (4) Reporting of net accounts receivable on December 31, 2018

Particular’s

As of December 2018

Accounts Receivable

$54,700

Less: Allowance for Bad Debts

($4,920)

Net Realizable Value

$49,780

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