At December 31, the Azuza Company had a balance of $754,000 in its Accounts Receivable account and a credit balance of $9,000 in the Allowance for Doubtful Accounts account. The company aged its accounts as follows: Current $608,000 0–60 days past due 88,000 61–180 days past due 40,000 Over 180 days past due 18,000 $754,000 In the past, the company has experienced credit losses as follows: one percent of current balances, five percent of balances 0–60 days past due, 20 percent of balances 61–180 days past due, and 40 percent of balances over six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable.
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.
At December 31, the Azuza Company had a balance of $754,000 in its
| Current | $608,000 |
| 0–60 days past due | 88,000 |
| 61–180 days past due | 40,000 |
| Over 180 days past due | 18,000 |
| $754,000 |
In the past, the company has experienced credit losses as follows: one percent of current balances, five percent of balances 0–60 days past due, 20 percent of balances 61–180 days past due, and 40 percent of balances over six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable.
Required
a. Prepare the
b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet.
a.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| Dec.31 | AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable | Answer
|
Answer
|
| AnswerBad Debts ExpenseAllowance for Doubtful AccountsAccounts Receivable | Answer
|
Answer
|
|
| To record allowance for credit losses. |
b. Do not use negative signs with your answers.
| Current Assets: | |||
| AnswerAccounts ReceivableLess: Allowance for Doubtful Accounts | Answer
|
||
| AnswerAccounts ReceivableLess: Allowance for Doubtful Accounts | Answer
|
||
| Answer
|
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
