At the beginning of Year 1, a company has a balance of $24,800 in accounts receivable. Because the company is a privately owned company, the company has used only the direct write-off method to account for uncollectible accounts. However, at the end of Year 1, the company wishes to obtain a loan at the local bank, which requires the preparation of proper financial statements. This means that the company now will need to use the allowance method. The following transactions occur during Year 1 and Year 2. 1. During Year 1, install air conditioning systems on account, $178,000. 2. During Year 1, collect $173,000 from customers on account. 3. At the end of Year 1, estimate that uncollectible accounts total 20% of ending accounts receivable. 4. In Year 2, customers' accounts totaling $6,800 are written off as uncollectible. Record each transaction using the direct write-off method. (If no entry is required for a particular transaction/event, select "No ournal Entry Required" in the first account field.)
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 Year 1, a company has a balance of $24,800 in accounts receivable. Because the company is a
privately owned company, the company has used only the direct write-off method to account for uncollectible accounts.
However, at the end of Year 1, the company wishes to obtain a loan at the local bank, which requires the preparation of
proper financial statements. This means that the company now will need to use the allowance method. The following
transactions occur during Year 1 and Year 2.
1. During Year 1, install air conditioning systems on account, $178,000.
2. During Year 1, collect $173,000 from customers on account.
3. At the end of Year 1, estimate that uncollectible accounts total 20% of ending accounts receivable.
4. In Year 2, customers' accounts totaling $6,800 are written off as uncollectible.
2. Record each transaction using the direct write-off method. (If no entry is required for a particular transaction/event, select "No
Journal Entry Required" in the first account field.)
X Answer is complete but not entirely correct.
No
Transaction
General Journal
Debit
Credit
1
1
Accounts Receivable
178,000
Service Revenue
178,000
2
Cash
173,000
Accounts Receivable
173,000
3
3
Bad Debt Expense
5,960
Allowance for Uncollectible Accounts
5,960
4
4
Allowance for Uncollectible Accounts
6,800
Accounts Receivable
6,800](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3360c4a6-c639-41c4-ba15-42ca4b2b8c54%2F59e4fb97-a4fc-4846-aca3-754b231127a5%2Fkvs428_processed.png&w=3840&q=75)
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