Q21E
Question
During August 2018, Lima Company recorded the following:
• Sales of \(133,300 (\)122,000 on account; \(11,300 for cash). Ignore Cost of Goods Sold.
• Collections on account, \)106,400.
• Write-offs of uncollectible receivables, \(990.
• Recovery of receivable previously written off, \)800.
Requirement:
1. Journalize Lima’s transactions during August 2018, assuming Lima uses the direct write-off method.
2. Journalize Lima’s transactions during August 2018, assuming Lima uses the allowance method
Step-by-Step Solution
Verified(1) Journal entries under direct write-off method are recorded in Step 1.
(2) Journal entries under allowance method are recorded in Step 2.
Date | Account and explanation | Debit | Credit |
August 2018 | Accounts receivable | $ 122,000 |
|
| Sales Revenue |
| $ 122,000 |
| (Sold goods on account) |
|
|
|
|
|
|
August 2018 | Cash | $ 11,300 |
|
| Sales Revenue |
| $ 11,300 |
| (Sold goods on cash) |
|
|
|
|
|
|
August 2018 | Cash | $ 106,400 |
|
| Accounts receivable |
| $ 106,400 |
| (Collected cash on account.) |
|
|
|
|
|
|
August 2018 | Bad Debts | $ 990 |
|
| Accounts Receivable |
| $ 990 |
| (Recorded bad debts expense for the period.) |
|
|
|
|
|
|
August 2018 | Account Receivable | $800 |
|
| Bad Debts |
| $800 |
| (Reinstated previously written off account) |
|
|
|
|
|
|
August 2018 | Cash | $800 |
|
| Accounts receivable |
| $ 800 |
| (Collected cash on account.) |
|
|
|
|
|
|
August 2018 | Bad debts | $190 |
|
| Allowance for Bad debts |
| $190 |
| (Recorded bad debts expense for the period.) |
|
|
Date | Account and explanation | Debit | Credit |
August 2018 | Accounts receivable | $ 122,000 |
|
| Sales Revenue |
| $ 122,000 |
| (Sold goods on account) |
|
|
|
|
|
|
August 2018 | Cash | $ 11,300 |
|
| Sales Revenue |
| $ 11,300 |
| (Sold goods on cash) |
|
|
|
|
|
|
August 2018 | Cash | $ 106,400 |
|
| Accounts receivable |
| $ 106,400 |
| (Collected cash on account.) |
|
|
|
|
|
|
August 2018 | Allowance for Bad Debts | $ 990 |
|
| Accounts Receivable |
| $ 990 |
| (Recorded bad debts expense for the period.) |
|
|
|
|
|
|
August 2018 | Account Receivable | $800 |
|
| Allowance for Bad Debts |
| $800 |
| (Reinstated previously written off account) |
|
|
|
|
|
|
August 2018 | Cash | $800 |
|
| Accounts receivable |
| $ 800 |
| (Collected cash on account.) |
|
|
|
|
|
|
August 2018 | Bad debts | $190 |
|
| Allowance for Bad debts |
| $190 |
| (Recorded bad debts expense for the period.) |
|
|