At the beginning of the current period, Azim Enterprises Ltd. had balances in Accounts Receivable of $2.1 million and in Allowance for Doubtful Accounts of $144,000 (credit). During the period, Azim had credit sales of $4.3 million with cost of goods sold of $3.1 million and collections of $5.2 million. It wrote off $185,000 of accounts receivable. However, a $28,000 account written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $85,000 at the end of the period. Instructions Prepare the entries to record sales and collections during the period. Prepare the entry to record the write off of the $185,000 of accounts deemed uncollectible during the period. Prepare the entry(ies) to record the collection of the $28,000 account written off as part of the uncollectible accounts in part (b). Prepare the entry to record bad debts expense for the period. Prepare T accounts for Accounts Receivable and Allowance for Doubtful Accounts. Enter the opening balances. Post the journal entries prepared in parts (a) through (d). Determine the ending balances. Show the statement of financial position presentation of the receivables at the end of the period.
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 the beginning of the current period, Azim Enterprises Ltd. had balances in
Instructions
- Prepare the entries to record sales and collections during the period.
- Prepare the entry to record the write off of the $185,000 of accounts deemed uncollectible during the period.
- Prepare the entry(ies) to record the collection of the $28,000 account written off as part of the uncollectible accounts in part (b).
- Prepare the entry to record
bad debts expense for the period. -
- Prepare T accounts for Accounts Receivable and Allowance for Doubtful Accounts.
- Enter the opening balances.
Post the journal entries prepared in parts (a) through (d).- Determine the ending balances.
- Show the
statement of financial position presentation of the receivables at the end of the period.
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