Accounting Help(Accounts Receivable)?

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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.

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Record transactions for each date

I am having trouble with the last transaction. I cannot get the values correct.

1 Answer

  • 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


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