edex Ltd is a manufacturer that makes all sales on a 30-day credit terms. Annual sales are approximately $65 million. At the end of 2014 accounts receivable were presented in the company’s Balance Sheet as below: Accounts Receiv
Fedex Ltd is a manufacturer that makes all sales on a 30-day credit terms. Annual sales are approximately $65 million. At the end of 2014
Accounts Receivable $5,350,000
Less: Allowance for Doubtful accounts $90,000
During 2015, $740,000 in accounts receivable were written off as uncollectible. Of these amounts written off, receivables totalling $34,000 were unexpectedly collected. At the end of 2015, an ageing of accounts receivable indicated a need for an $80,000 allowance to cover possible failure to collect the accounts currently outstanding.
Fedex Ltd makes
Required:
- Explain the difference between making an allowance for
bad debts and writing off bad debt. Explain how each case is treated and shown in accounting. - Prepare one
journal entry to summarize all accounts written off against the allowance for doubtful accounts in 2015.
3. Prepare entries to record the $44,000 in accounts receivable which were unexpectedly collected.
4. Prepare an adjusting entry on 31 December 2015 to increase the allowance for doubtful accounts to $90,000.
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