During the current year, Bob's Ceramics Shop had sales revenue of $161,000, of which $69,000 was on credit. At the start of the current year, Accounts Receivable showed a $19,000 debit balance and the Allowance for Doubtful Accounts showed a $1,200 credit balance. Collections of accounts receivable during the current year amounted to $55,000. Data during the current year follow: a. On December 31, an Account Receivable (Toby's Gift Shop) of $1,500 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt. b. On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2.0 percent of credit sales for the year. Required: 1. Prepare the required journal entries for the two items on December 31, the end of the accounting period. 2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations.
During the current year, Bob's Ceramics Shop had sales revenue of $161,000, of which $69,000 was on credit. At the start of the current year, Accounts Receivable showed a $19,000 debit balance and the Allowance for Doubtful Accounts showed a $1,200 credit balance. Collections of accounts receivable during the current year amounted to $55,000. Data during the current year follow: a. On December 31, an Account Receivable (Toby's Gift Shop) of $1,500 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt. b. On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 2.0 percent of credit sales for the year. Required: 1. Prepare the required journal entries for the two items on December 31, the end of the accounting period. 2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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During the current year, Bob's Ceramics Shop had sales revenue of $161,000, of which $69,000 was on credit. At the start of the
current year, Accounts Receivable showed a $19,000 debit balance and the Allowance for Doubtful Accounts showed a $1,200 credit
balance. Collections of accounts receivable during the current year amounted to $55,000.
Data during the current year follow:
a. On December 31, an Account Receivable (Toby's Gift Shop) of $1,500 from a prior year was determined to be uncollectible;
therefore, it was written off immediately as a bad debt.
b. On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad
debt losses on 2.0 percent of credit sales for the year.
Required:
1. Prepare the required journal entries for the two items on December 31, the end of the accounting period.
2. Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the income statement and
balance sheet for the current year. Disregard income tax considerations.
Answer is complete but not entirely correct.
Complete this question by entering your answers in the tabs below.
Req 1
Req 2A
Req 2B
Show how the amounts related to Accounts Receivable and Bad Debt Expense would be reported on the balance sheet for the
current year. Disregard income tax considerations. (Amounts to be deducted should be indicated by a minus sign.)
BOB'S CERAMICS SHOP
Current assets:
Accounts receivable
Allowance for doubtful accounts
Partial Balance Sheet
As of December 31
Accounts receivable, net of allowance for doubtful accounts
$ 31,500
1,080 x
$
32,580
< Req 2A
Req 2B
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