On 30 September, Emerald Travel has RM540,250 of accounts receivable. Emerald uses the allowance method of accounting for bad debts and has an existing credit balance in the allowance for doubtful debts accounts of RM13,750. Sold RM325,000 of merchandise (that cost RM178,500) to customers on credit. Received RM425,100 cash in payment of accounts receivable. Wrote off RM16,700 of uncollectible accounts receivable. In adjusting the accounts on 31 October, its fiscal year-end, the company estimated that 3.0% of accounts receivable will be uncollectible. Required: Prepare journal entries to record the above selected October transactions. The company uses the perpetual inventory system. Show the amount to be debited to the statement of comprehensive accounts and how Accounts Receivable and the Allowance/Provision for Doubtful debts appear on its 31 October statement of financial position.
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.
On 30 September, Emerald Travel has RM540,250 of
- Sold RM325,000 of merchandise (that cost RM178,500) to customers on credit.
- Received RM425,100 cash in payment of accounts receivable.
- Wrote off RM16,700 of uncollectible accounts receivable.
- In adjusting the accounts on 31 October, its fiscal year-end, the company estimated that 3.0% of accounts receivable will be uncollectible.
Required:
- Prepare
journal entries to record the above selected October transactions. The company uses the perpetual inventory system. - Show the amount to be debited to the statement of comprehensive accounts and how Accounts Receivable and the Allowance/Provision for Doubtful debts appear on its 31 October
statement of financial position .
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