Q5SE
Question
Applying the allowance method to account for uncollectibles
The Accounts Receivable balance and Allowance for Bad Debts for Signature Lamp
Company at December 31, 2017, was \(10,800 and \)2,000 (credit balance), respectively.
During 2018, Signature Lamp Company completed the following transactions:
a. Sales revenue on account, \(273,400 (ignore Cost of Goods Sold).
b. Collections on account, \)223,000.
c. Write-offs of uncollectibles, \(5,900.
d. Bad debts expense of \)5,200 was recorded
Requirements
1. Journalize Signature Lamp Company’s transactions for 2018 assuming Signature Lamp Company uses the allowance method.
2. Post the transactions to the Accounts Receivable, Allowance for Bad Debts, and Bad Debts Expense T-accounts, and determine the ending balance of each account.
3. Show how accounts receivable would be reported on the balance sheet at December 31, 2018.
Step-by-Step Solution
VerifiedAnswer
Date | Account and explanation | Debit | Credit |
2018 | |||
| Accounts receivable Sales Revenue (Sold goods on account) | $ 273,400 |
$ 273,400
|
| Cash Sales Revenue (Sold goods on account) | $ 223,000 |
$223,000 |
| Allowance for Bad Debts Accounts Receivable (Wrote off an uncollectible account) | $ 5,900 |
$ 5,900 |
| Bad Debts Allowance for Bad Debts (Recorded bad debts expense for the period.) | $5,200 |
$5,200 |
Accounts Receivable
Bal. $ 10,800 | Collections $ 223,000 |
Net credit sales$ 273,400 | Uncollectable $ 5,900 |
Bal. $ 55,300 |
|
Allowance for Bad Debts
Write off $ 5,900 | Bal. $ 2,000 |
| Provision $5,200 |
| Bal. $ 1,300 |
Bad Debts
$5,200 |
|
|
|
|
|
Particular’s | As at December, 2018 |
Accounts Receivable Less: Allowance for Bad Debts | $ 55,300 $ (1,300) |
Net Realizable Value | $54,000 |