107. The bookkeeper for a small book store prepared an unadjusted trial balance as shown below: Debit Credit $120 20 Accounts receivable Notes receivable, trade. Allowance for doubtful accounts........ Sale revenue Returned sales. Purchases. Purchase returns and allowances....... Retained earnings.. 30 500 2 $1,040 20 1,570 Prepare the appropriate entries indicated below. Each item is independent. (a) Record bad debt expense, assuming company experience indicates that 40 percent of sales are on account and 2 percent of net credit sales prove uncollectible. (b) Record bad debt expense if an aging schedule indicates that $10 of the receivable at the end of thi year will not be collected. (c) Record bad debt expense if company policy requires the allowance for doubtful accounts be maintained at 5 percent of total trade receivables.
Bad Debts
At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
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