Recording Revenue, Receivables, and Bad Debt Expense On January 1, 2019, Import Properties Inc. reported the following balances on its statement of financial position: Accounts receivable $2,105,000 Allowance for doubtful accounts 195,000 During 2019, the company conducted the following transactions: Sold goods on account for $6,000,000 Processed sales returns of $50,000 Processed sales allowances of $40,000 Collected $6,950,000 of accounts receivable Added interest to overdue accounts receivable of $150,000 Wrote off accounts receivable considered uncollectible of $75,000 Recovered accounts receivable previously written off of $45,000 Required: 1. Prepare the journal entries to record the above transactions. (Record sales) (Record sales returns) (Record sales allowances) (Record collections) (Record interest income) (Record write-off of accounts receivable) (Record accounts previously written off) 2. Record the journal entry for bad debt expense at December 31, assuming that the allowance for doubtful accounts at December 31 should be $225,000. Dec. 31 (Record bad debts expense) 3. Post all of the above entries to T-accounts for accounts receivable, allowance for doubtful accounts, and other accounts you deem are required. Accounts Receivable Write-offs Beg. Balance Returns Sales Allowances Interest Collections Recoveries Collections Balance Allowance for Doubtful Accounts Write-offs Beg. Balance Recoveries Bad Debts Balance Cash Collections Recoveries Balance Sales Sales Sales Returns Returns Sales Allowances Allowances Interest Income Interest Bad Debts Bad Debts
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.
Recording Revenue, Receivables, and Bad Debt Expense
On January 1, 2019, Import Properties Inc. reported the following balances on its
| $2,105,000 | |
| Allowance for doubtful accounts | 195,000 |
During 2019, the company conducted the following transactions:
- Sold goods on account for $6,000,000
- Processed sales returns of $50,000
- Processed sales allowances of $40,000
- Collected $6,950,000 of accounts receivable
- Added interest to overdue accounts receivable of $150,000
- Wrote off accounts receivable considered uncollectible of $75,000
- Recovered accounts receivable previously written off of $45,000
Required:
1. Prepare the journal entries to record the above transactions.
| (Record sales) | |||
| (Record sales returns) | |||
| (Record sales allowances) | |||
| (Record collections) | |||
| (Record interest income) | |||
| (Record write-off of accounts receivable) | |||
| (Record accounts previously written off) |
2. Record the
| Dec. 31 | |||
| (Record |
3. Post all of the above entries to T-accounts for accounts receivable, allowance for doubtful accounts, and other accounts you deem are required.
| Accounts Receivable | |||
|---|---|---|---|
| Write-offs | |||
| Beg. Balance | Returns | ||
| Sales | Allowances | ||
| Interest | Collections | ||
| Recoveries | Collections | ||
| Balance |
| Allowance for Doubtful Accounts | |||
|---|---|---|---|
| Write-offs | Beg. Balance | ||
| Recoveries | |||
| Bad Debts | |||
| Balance |
| Cash | |||
|---|---|---|---|
| Collections | |||
| Recoveries | |||
| Balance |
| Sales | |||
|---|---|---|---|
| Sales |
| Sales Returns | |||
|---|---|---|---|
| Returns |
| Sales Allowances | |||
|---|---|---|---|
| Allowances |
| Interest Income | |||
|---|---|---|---|
| Interest |
| Bad Debts | |||
|---|---|---|---|
| Bad Debts |
4. Prepare the proper statement of financial position presentation of accounts receivable at December 31, 2019.
| Import Properties Inc. | |
| Partial Statement of Financial Position | |
| December 31, 2019 | |
| $ |
5. Prepare the proper statement of earnings presentation of the statement of earnings accounts for the year ended December 31.
| Import Properties Inc. | |
| Partial Income Statement | |
| For The Year Ended December 31, 2019 | |
| $ | |
| Expenses | |
| $ | |
| Other income and expenses | |
| $ |
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