E9.8 (LO 2) On December 31, 2020, Ling Co. estimated that 2% of its net accounts receiva- ble of $450,000 will become uncollectible. The company recorded this amount as an addition to Allowance for Doubtful Accounts. The allowance account had a zero balance before adjustment at December 31, 2020. On May 11, 2021, Ling Co. determined that the Jeff Shoemaker account was uncollectible and wrote off $1,100. On June 12, 2021, Shoemaker paid the amount previously written off. Instructions Prepare the journal entries on December 31, 2020, May 11, 2021, and June 12, 2021. Journalize percentage-of-receivables basis, write-off, recovery.
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.
E9.8
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