Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2024, accounts receivable totaled $700,000. The allowance method is used to account for uncollectible accounts. The allowance for uncollectible accounts had a credit balance of $47,000 at the beginning of 2024 and $28,500 in receivables were written off during the year as uncollectible. Also, $2,700 in cash was received in December from a customer whose account previously had been written off. The company estimates bad debts by applying a percentage of 15% to accounts receivable at the end of the year. Required: Prepare journal entries to record the write-off of receivables, the collection of $2,700 for previously written off receivables, and the year-end adjusting entry for bad debt expense. How would accounts receivable be shown in the 2024 year-end 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.
Colorado Rocky Cookie Company offers credit terms to its customers. At the end of 2024,
Required:
- Prepare
journal entries to record the write-off of receivables, the collection of $2,700 for previously written off receivables, and the year-endadjusting entry for bad debt expense. - How would accounts receivable be shown in the 2024 year-end
balance sheet ?
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