The December 31, 20X7 statement of financial position of Howson Limited showed Trade Accounts Receivable of $450,000 and a credit balance in Allowance for Doubtful Accounts of $ 45,000. During 20X8, the following transactions occurred: service revenue billed on account, $1,500,000; collections from customers, $1,300,000; accounts written off $37,000; previously written off accounts of $4,000 were collected. Required: (a) Record the 20X8 transactions. (b) If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 5% of trade accounts receivable, what is the adjusting entry at December 31, 20X8?

The December 31, 20X7 statement of financial position of Howson Limited showed Trade Accounts Receivable of $450,000 and a credit balance in Allowance for Doubtful Accounts of $ 45,000. During 20X8, the following transactions occurred: service revenue billed on account, $1,500,000; collections from customers, $1,300,000; accounts written off $37,000; previously written off accounts of $4,000 were collected. Required: (a) Record the 20X8 transactions. (b) If the company uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 5% of trade accounts receivable, what is the adjusting entry at December 31, 20X8?

College Accounting, Chapters 1-27

23rd Edition

ISBN:9781337794756

Author:HEINTZ, James A.

Publisher:HEINTZ, James A.

Chapter16: Accounting For Accounts Receivable

Section: Chapter Questions

Problem 3CP: At the end of 20-3, Martel Co. had 410,000 in Accounts Receivable and a credit balance of 300 in...

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Concept explainers

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.

Question

The December 31, 20X7 statement of financial position of Howson Limited showed Trade
Accounts Receivable of $450, 000 and a credit balance in Allowance for Doubtful Accounts of $
45,000. During 20X8, the following transactions occurred: service revenue billed on account,
$1,500,000; collections from customers, $1,300,000; accounts written off $37,000; previously
written off accounts of $4,000 were collected. Required: (a) Record the 20X8 transactions. (b)
If the company uses the percentage of receivables basis to estimate bad debts expense and
determines that uncollectible accounts are expected to be 5% of trade accounts receivable,
what is the adjusting entry at December 31, 20X8?

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