redit Losses Based on Accounts Receivable At December 31, the Hope Company had a balance of $1,241,200 in its Accounts Receivable account and a credit balance of $11,200 in the Allowance for Doubtful Accounts account. The accounts receivable T-account consisted of $1,264,800 in debit balances and $23,600 in credit balances. The company aged its accounts as follows: Current $1,060,000 0-60 days past due 124,000 61-180 days past due 46,000 Over 180 days past due 34,800 $1,264,800 In the past, the company has experienced credit losses as follows: 2% of current balances, 6% of balances 0-60 days past due, 15% of balances 61-180 days past due, and 30% of balances over six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable. Required a. Prepare the adjusting entry to record the allowance for doubtful accounts for the year. b. Show how Accounts Receivable (including the credit balances) and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet. a. General Journal Date Description Debit Credit Dec.31 Answer Answer Answer Answer Answer Answer To record allowance for credit losses. b. (Do not use negative signs with your answers.) Current Assets: Answer Answer Answer Answer Answer Current Liabilities: Customers' Overpayments Answer PreviousSave AnswersNext
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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.
Credit Losses Based on
| Current | $1,060,000 |
| 0-60 days past due | 124,000 |
| 61-180 days past due | 46,000 |
| Over 180 days past due | 34,800 |
| $1,264,800 |
In the past, the company has experienced credit losses as follows: 2% of current balances, 6% of balances 0-60 days past due, 15% of balances 61-180 days past due, and 30% of balances over six months past due. The company bases its allowance for doubtful accounts on an aging analysis of accounts receivable.
Required
a. Prepare the
b. Show how Accounts Receivable (including the credit balances) and the Allowance for Doubtful Accounts would appear on the December 31 balance sheet.
a.
| General Journal | |||
|---|---|---|---|
| Date | Description | Debit | Credit |
| Dec.31 | Answer | Answer | Answer |
| Answer | Answer | Answer | |
| To record allowance for credit losses. |
b. (Do not use negative signs with your answers.)
| Current Assets: | |||
| Answer | Answer | ||
| Answer | Answer | ||
| Answer | |||
| Current Liabilities: | |||
| Customers' Overpayments | Answer |
The credit balance of account receivable represents the overpayments made by debtors, and it is a liability for the business and hence recorded as current liability in the balance sheet.
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