The Oberyn Sign Company uses the allowance method in accounting for uncollectible accounts. Past experience indicates that 6% of accounts receivable will eventually be uncollectible. Selected account balances at December 31, 2017, and December 31, 2018, appear below: Net Credit Sales Accounts Receivable Allowance for Doubtful Accounts 12/31/2017 $600,000 120,000 6,000 12/31/2018 $750,000 150,000 The following events related to receivables occurred during 2018; June 10 July 12 Aug. 10 Determined that the account of Jon Snow for $1,350 is uncollectible. Determined that the account of Davos Seaworth for $4,500 is uncollectible. Received a cheque for $300 as payment on account from Arya Stark, whose account had previously been written off as uncollectible. Accepted Margaery Tyrell Inc.'s $9,000, 6-month, 4% note in settlement of a past-due balance on account. Oct. 25
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.
(A) Prepare the journal entries to record the events above dates June 10, July 12, August 10 and October 25.
(B) Prepare the
(C) Show the ledger account for Allowance for Doubtful Accounts with all entries for 2018 and the ending balance after adjustment at December 31, 2018.
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