Question

Recording receivables transactions

On January 1, 2017, Brown Company showed the following account balances:

Account	Debit	Credit
Accounts receivable	$634,000
Allowance for doubtful accounts		$28,000

During the next fiscal year, the following events occurred:

1. Repair revenues for the year were $5,850,000. 75% were on account, 25% were cash sales.
2. Collections for the year were $4,705,000.
3. $35,000 was added to the total accounts receivable due to interest on overdue accounts.
4. Write offs of uncollectible accounts totaled $27,000.
5. One of the accounts written off in part d.) was collected: $2,250.
6. On December 31, 2017 (the company’s fiscal-year end), using the aging-of-receivables method, the allowance for doubtful accounts was estimated to be $33,000.

Required:

1. Record journal entries based on the summary events above.
2. Show how net receivables will be presented on the December 31, 2017 balance sheet.

Answer 1

Ans 1 Credit Debit $14,62,500 $43,87,500 $58,50,000 $47,05,000 $47,05,000 $35,000 $35,000 Account Title Cash Accounts Receivable Service Revenue (To record service revenue) Cash Accounts Receivable (To record collecton from customer) Accounts Receivable Interest Income (To record interest income) Allowance for doubtful accounts Accounts Receivable (To record write of account) Accounts Receivable Allowance for doubtful accounts (To resntate the account receivabe) Cash Accounts Receivable (To record collection prevously written off) Bas Debt Expense [Note (0)] Allowance for doubtful accounts (To record bad debt expense) $27,000 $27,000 $2,250 $2,250 $2,250 $2,250 $29,750 $29,750 Note (0) Balance as on Jan 1, 2017 in Allowance for doubtful account Less: Amount written off Add: Amount reinstated on collection Balance before adjusting entry $28,000 -$27,000 $2,250 $3,250 Desired balance in Allowance for doubtful account on Dec 31, 2017 | Less: Balance before adjusting entry Bad Debt entry to be passed $33,000 -$3,250 $29,750

Ans 2 Calculation of Account Receivable as on Dec 31, 2017 Account Receivable, Jan 1 2017 Add: Sales Add: Overdue Interest Less: Collecton Less: Account Written off Add: Amount reinstated Less: Collection of amount reinstated Account Receivable, Dec 31 2017 $6,34,000 $43,87,500 $35,000 -$47,05,000 -$27,000 $2,250 -$2,250 $3,24,500 Brown Company Balance Sheet (Partial) Dec 31, 2017 Account Receivable Less: Allowance for Doubtful Accounts Net Accounts receivable $3,24,500 -$33,000 $2,91,500