Accounting for uncollectible accounts using the allowance method (aging-of-receivables) and reporting receivables on the balance sheet. At September 30, 2018, the accounts of Roxbury Medical Center (RMC) include the following: Accounts Receivable $154,000 Allowance for Bad Debts (credit balance) 3,700 During the last quarter of 2018, RMC completed the following selected transactions: • Sales on account, $465,000. Ignore Cost of Goods Sold. • Collections on account, $441,800. • Wrote off accounts receivable as uncollectible: Jenkins, Co., $1,900; Sony, $800; and Smith, Inc., $500 • Recorded bad debts expense based on the aging of accounts receivable, as follows: Age of Accounts 1–30 Days 31–60 Days 61–90 Days Over 90 Days Accounts Receivable $ 97,000 $ 37,000 $ 17,000 $ 14,000 Estimated percent uncollectible 0.2% 3.5% 29% 32% Requirements Open T-accounts for Accounts Receivable and Allowance for Bad Debts. Journalize the transactions (omit explanations) and post to the two accounts. Show how Roxbury Medical Center should report net accounts receivable on its December 31, 2018, balance sheet.
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.
Accounting for uncollectible accounts using the allowance method (aging-of-receivables) and reporting receivables on the
At September 30, 2018, the accounts of Roxbury Medical Center (RMC) include the following:
|
|
$154,000 |
|
Allowance for |
3,700 |
During the last quarter of 2018, RMC completed the following selected transactions:
|
• Sales on account, $465,000. Ignore Cost of Goods Sold. • Collections on account, $441,800. • Wrote off accounts receivable as uncollectible: Jenkins, Co., $1,900; Sony, $800; and Smith, Inc., $500 • Recorded bad debts expense based on the aging of accounts receivable, as follows: |
|
|
Age of Accounts |
|||
|
|
1–30 Days |
31–60 Days |
61–90 Days |
Over 90 Days |
|
Accounts Receivable |
$ 97,000 |
$ 37,000 |
$ 17,000 |
$ 14,000 |
|
Estimated percent uncollectible |
0.2% |
3.5% |
29% |
32% |
Requirements
- Open T-accounts for Accounts Receivable and Allowance for Bad Debts. Journalize the transactions (omit explanations) and post to the two accounts.
- Show how Roxbury Medical Center should report net accounts receivable on its December 31, 2018, balance sheet.
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