Question

1) The company had sales revenue $4,000,000 reported on its Income Statement The company had an accounts receivable balance of $200,000 and an allowance for uncollectible accounts balance of $1,000 (credit) at the end of the year (before any adjusting entry) The accountant determined that 1% of the SALES REVENUE will ultimately be uncollectible. a) Prepare the journal entry to record Uncollectible Accounts expense for the year. Account Name debit Credit b) Fill in the amounts that would appear on the Balance Sheet after the above adjusting entry Accounts receivable Less: allowance for uncollectible accounts Accounts receivable, net

Answer 1

1. a. sales revenue of $ 4,000,000; Accounts receivables of $ 200,000; Allowance for uncollectable balance $1,000

uncollectible sales revenue, as determined by Accountant : 1% of sales revenue

Amount of uncollectible sales revenue to be recorded: $ 4,000,000 * 1% = $ 40,000

Amount already recorded : $ 1,000

Entry to be passed for $ 39,000

Journal entry:

Dr Statement of profit and loss $ 39,000

Cr Provision for doubtful debts $ 39,000

b) Accounts receivables : $ 2,000,000

Less: Allowance for uncollectible amounts : $ 40,000

Accounts receivable, net $ 1,960,000