Pronghorn Corp.’s balance sheet at December 31, 2016, included the following. Note receivable $600,000 Interest receivable 34,000 Accounts receivable 1,385,000 Less: Allowance for doubtful accounts receivable 90,000 1,295,000 $1,929,000 The following occurred in 2017. 1. Pronghorn made sales of $10,680,000. All sales were credit sales. Pronghorn allows some discounts for early payment of receivables and uses the gross method to record sales. 2. Customer accounts of $83,750 were written off during the year. 3. Accounts receivable of $10,780,000 were collected. Collections for the year included $200,000 of accounts on which 2% sales discounts were allowed. 4. $10,500 was received in payment of an account which was written off the books as worthless in 2016. 5. At year-end (December 31, 2017), Pronghorn estimated that its Allowance for Doubtful Accounts needed a balance of $72,000. This estimate is based on an analysis of aged accounts receivable. 6. The note receivable and related interest were due January 1, 2017. Young collected both, in full, on that date. Prepare all journal entries necessary to reflect the transactions above.
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.
Pronghorn Corp.’s
| Note receivable | $600,000 | |||
|---|---|---|---|---|
| Interest receivable | 34,000 | |||
| 1,385,000 | ||||
| Less: Allowance for doubtful accounts receivable | 90,000 | 1,295,000 | ||
| $1,929,000 |
The following occurred in 2017.
| 1. | Pronghorn made sales of $10,680,000. All sales were credit sales. Pronghorn allows some discounts for early payment of receivables and uses the gross method to record sales. | ||
| 2. | Customer accounts of $83,750 were written off during the year. | ||
| 3. | Accounts receivable of $10,780,000 were collected. Collections for the year included $200,000 of accounts on which 2% sales discounts were allowed. | ||
| 4. | $10,500 was received in payment of an account which was written off the books as worthless in 2016. | ||
| 5. | At year-end (December 31, 2017), Pronghorn estimated that its Allowance for Doubtful Accounts needed a balance of $72,000. This estimate is based on an analysis of aged accounts receivable. | ||
| 6. |
The note receivable and related interest were due January 1, 2017. Young collected both, in full, on that date.
Prepare all |
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