At January 1, the Griffin Company had the following accounts on its books: Accounts Receivable $129,000 Debit Allowance for Doubtful Accounts $7,100 Credit During the year, credit sales were: $841,000 and collections on account were: $824,000 The following transactions, among others, occurred during the year: Jan.11 Wrote off J. Wolf's account, $3,100 Apr.29 Wrote off B. Avery's account, $1,300 Nov.15 Received $1,300 from B. Avery, to pay a debt that had been written off on April 29, in final settlement of the account written off on April 29. This amount is not included in the $824,000 collections. Dec.05 Wrote off D. Wright's account, $2,450 Dec.31 In an adjusting entry, recorded the allowance for doubtful accounts at 1.1% of credit sales for the year. Required a. Prepare the journal entries to record the credit sales, the collections on account, the transactions and the adjustment. b. Show how Accounts Receivable (including the credit balances) and the Allowance for Doubtful Accounts appear on the December 31 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.
| $129,000 | Debit | |
| Allowance for Doubtful Accounts | $7,100 | Credit |
| During the year, credit sales were: | $841,000 | |
| and collections on account were: | $824,000 |
The following transactions, among others, occurred during the year:
| Jan.11 | Wrote off J. Wolf's account, | $3,100 |
| Apr.29 | Wrote off B. Avery's account, |
$1,300 |
| Nov.15 | Received $1,300 from B. Avery, to pay a debt that had been written off on | |
| April 29, in final settlement of the account written off on April 29. | ||
| This amount is not included in the $824,000 collections. | ||
| Dec.05 | Wrote off D. Wright's account, | $2,450 |
| Dec.31 | In an |
1.1% |
| of credit sales for the year. |
Required
a. Prepare the journal entries to record the credit sales, the collections on account, the transactions and the adjustment.
b. Show how Accounts Receivable (including the credit balances) and the Allowance for Doubtful Accounts appear on the December 31
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