The following events occur for The Underwood Corporation during 2012 and 2013, its first two years of operations.
June 12, 2012 Provide services to customers on account for $36,000.
September 17, 2012 Receive $10,500 from customers on account.
December 31, 2012 Estimate that 30% of accounts receivable at the end of the year will not be received.
March 4, 2013 Provide services to customers on account for $50,000.
May 20, 2013 Receive $19,400 from customers for services provided in 2012.
July 2, 2013 Write off the remaining amounts owed from services provided in 2012.
October 19, 2013 Receive $16,400 from customers for services provided in 2013.
December 31, 2013 Estimate that 45% of accounts receivable at the end of the year will not be received.
Record transactions for each date
I am having trouble with the last transaction. I cannot get the values correct.
1 Answer
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June 12, 2012 Provide services to customers on account for $36,000.
Dr Accounts Receivable 36,000
Cr Service Fees 36,000
September 17, 2012 Receive $10,500 from customers on account.
Dr Cash 10,500
Cr Accounts Receivable 10,500
December 31, 2012 Estimate that 30% of accounts receivable at the end of the year will not be received.
36,000 – 10,500 = 25,500 A/R balance
25,500 x 30% = 7,650 adjustment
Dr Bad Debt Expense 7,650
Cr Allowance for Doubtful Accounts 7,650
March 4, 2013 Provide services to customers on account for $50,000.
Dr Accounts Receivable 50,000
Cr Service Fees 50,000
May 20, 2013 Receive $19,400 from customers for services provided in 2012.
Dr Cash 19,400
Cr Accounts Receivable 19,400
July 2, 2013 Write off the remaining amounts owed from services provided in 2012.
25,500 – 19,400 = 6,100 written off
Dr Allowance for Doubtful Accounts 6,100
Cr Accounts Receivable 6,100
October 19, 2013 Receive $16,400 from customers for services provided in 2013.
Dr Cash 16,400
Cr Accounts Receivable 16,400
December 31, 2013 Estimate that 45% of accounts receivable at the end of the year will not be received.
Current credit balance in the Allowance account = 7,650 – 6,100 = 1,550
Current balance in the A/R account = 50,000 – 16,400 = 33,600
33,600 x 45% = 15,120 amount estimated uncollectible accounts
When using receivables as a basis for estimation of bad debts, you need to make an adjusting entry where the credit balance after the entry equals the amount estimated to be uncollectible (15,120). Since there is already a credit balance of 1,550 in the Allowance account, the entry would be 15,120 – 1,550 = 13,570
Dr Bad Debt Expense 13,570
Cr Allowance for Doubtful Accounts 13,570
The Allowance account now has a credit balance of 15,120, the amount that is estimated to be uncollectible.
Source(s): Accountng Fan
