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AP6-8B (Accounts receivable and uncollectible accounts—aging of receivables method) Johnson Ltd. reported the following information on...


AP6-8B (Accounts receivable and uncollectible accounts—aging of receivables method) Johnson Ltd. reported the following infor
AP6-8B (Accounts receivable and uncollectible accounts—aging of receivables method) Johnson Ltd. reported the following information on financial statements for the year ended December 31, 2019: $2,978,500 Accounts receivable 95,312 Allowance for doubtful accounts 152,305 Bad debts expense During 2020, the company had the following transactions related to receivables: a. Sales were $26,358,000, of which $21,086,000 were on account. b. Collections of accounts receivable were $19.923,000. c. Writeoffs of accounts receivable were $102,200. d. Recoveries of accounts previously written off as uncollectible were $21,300. (Note that this amount is not included in the collections referred to in item b above.) Required 1. Prepare the journal entries to record each of the four items above. 2. Set up T accounts for the Accounts Receivable and the Allowance for Doubtful Accounts and enter their January 1, 2020, balances. Then post the entries from part "a" and calculate the new balances in these accounts. 3. Prepare the journal entry to record the bad debts expense for 2020. Johnson Ltd. uses the aging of accounts receivable method and has prepared an aging schedule, which indicates that the estimated value of the uncollectible accounts as at the end of 2020 is $129,300. 4. Show what would be presented on the statement of financial position as at December 31, 2020, related to accounts receivable.
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Answer:

1. Journal Entries:

a. Accounts Receivables A/c Dr. 21086000
Cash A/c Dr. 5272000
To Sales A/c 26358000
b. Cash A/c Dr. 19923000
To Accounts Receivables A/c 19923000
c. Allowance for doubfull accounts 95312
Bad Debts A/c Dr. 6888
To Accounts Receivables 102200
d. Cash A/c Dr. 21300
To Bad Debts recovered A/c 21300

2. T Accounts:

Accounts Receivables
Date Particulars Amount Date Particulars Amount
january 1st 2020 To Opening balance 2978500 By Cash 19923000
To Sales 21086000 By Allowance for doubtfull debts 95312
By Bad Debts 6888
December 31st 2020 By Closing balance 4039300
24064500 24064500
Allowance for doubtful Debts a/c
Date Particulars Amount Date Particulars Amount
To Accounts Receivables 95312 january 1st 2020 By Opening balance 95312
95312 95312

3 if the estimated value of uncollectable accounts at year end is measured of $ 129300.00, then following entry of bad debts is to be passed:

Bad Debts A/c Dr. 129300

To Allowance for doubfull debts a/c 129300

4. the following balance of accounts receivable will be presented under assets - Current assets- of statement of financial position:

Accounts Receivable (gross) = $ 4039300 (As per T account above)

Less: Allowance for doubtfull debts = $ 129300

Accounts Receivable (Net) =  $ 3910000

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