Illustrate the effects on the accounts and financial statements of the following transactions in the accounts of Valley Care & Supplies Co., a local hospital supply company that uses the direct write-off method of accounting for uncollectible receivables: If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts. create a balance sheet for all dates given. March 18. Received $26,500 on an account. March 18. Wrote off the remaining $83,190 owed on account as uncollectible. Aug. 29. Reinstated the account that had been written off on March 18. (Do not record the collection of cash yet.) Aug. 29. Received $83,190 cash in full payment for the reinstated account.
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.
Illustrate the effects on the accounts and financial statements of the following transactions in the accounts of Valley Care & Supplies Co., a local hospital supply company that uses the direct write-off method of accounting for uncollectible receivables:
If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and
create a
March 18. Received $26,500 on an account.
March 18. Wrote off the remaining $83,190 owed on account as uncollectible.
Aug. 29. Reinstated the account that had been written off on March 18. (Do not record the collection of cash yet.)
Aug. 29. Received $83,190 cash in full payment for the reinstated account.
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