A summary of Milan Fashion's December 31, 2021, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group: Age Group Amount % 0-60 days $40,000 0.5 61-90 days 15,000 1.5 91-120 days 2,000 15.0 Over 120 days 800 80.0 The allowance for uncollectible accounts had a credit balance of $1,600 at January 1, 2021. During the year bad debts of $1,150 were written off. Also, $150 previously written off were paid by a customer. Required: Prepare all 2021 journal entries with respect to bad debts and the allowance for uncollectible accounts. Show computations. Prepare a T account for the allowance for uncollectible accounts from 1/1 to 12/31/21.
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.
A summary of Milan Fashion's December 31, 2021,
Age Group Amount %
0-60 days $40,000 0.5
61-90 days 15,000 1.5
91-120 days 2,000 15.0
Over 120 days 800 80.0
The allowance for uncollectible accounts had a credit balance of $1,600 at January 1, 2021. During the year
Required:
- Prepare all 2021
journal entries with respect to bad debts and the allowance for uncollectible accounts. Show computations. - Prepare a T account for the allowance for uncollectible accounts from 1/1 to 12/31/21.
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
