Chapter 5, Problem 5.7S

LO 5

(Learning Objective 5: Evaluate collectibility using the allowance for uncollectible accounts) During its first year of operations, Spring Garden Inc., had sales of $439,000, all on account. Industry experience suggests that Spring Garden’s uncollectibles will amount to 4% of credit sales. At December 31, 2018, accounts receivable total $59,000. The company uses the allowance method to account for uncollectibles.

  1.    Make Spring Garden’s journal entry for uncollectible-account expense using the percent-of-sales method.

  2.    Show how Spring Garden should report accounts receivable on its balance sheet at December 31, 2018.