On November 1, 2017, Recchi Company showed the following account balances: Account Debit Credit Accounts receivable $35,000 Allowance for doubtful accounts $2,000 During the next fiscal year, the following events occurred: a.) Consulting revenues for the year were $425,000. 95% were on account, 5% were cash sales. b.) Collections for the year were $375,000. c.) $5,000 was added to the total accounts receivable due to interest on overdue accounts. d.) Writeoffs of uncollectible accounts totaled $3,500. e.) One of the accounts written off in part d.) was collected: $750. f.) On October 31, 2018 (the company’s fiscal-year end), using the aging-of-receivables method, the allowance for doubtful accounts was estimated to be $3,500. a.) Record journal entries based on the summary events above.Required: b.) Show how net receivables will be presented on the October 31, 2018 balance sheet.
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 November 1, 2017, Recchi Company showed the following account balances:
|
Account |
Debit |
Credit |
|
|
$35,000 |
|
|
Allowance for doubtful accounts |
|
$2,000 |
During the next fiscal year, the following events occurred:
a.) Consulting revenues for the year were $425,000. 95% were on account, 5% were cash sales.
b.) Collections for the year were $375,000.
c.) $5,000 was added to the total accounts receivable due to interest on overdue accounts. d.) Writeoffs of uncollectible accounts totaled $3,500.
e.) One of the accounts written off in part d.) was collected: $750.
f.) On October 31, 2018 (the company’s fiscal-year end), using the aging-of-receivables method, the allowance for doubtful accounts was estimated to be $3,500.
a.) Record journal entries based on the summary events above.Required:
b.) Show how net receivables will be presented on the October 31, 2018 balance sheet.
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