Chapter 9, Problem 4APSA

To determine

Journal Entries:

Journal entries are used to record the transactions of an organization in a chronological order. Based on these journal entries, the amounts are posted to the relevant ledger accounts.

Accounting Rules for Journal Entries:

⮚ To increase balance of the account: Debit assets, expenses, losses and credit all liabilities, capital, revenue and gains.

⮚ To decrease balance of the account: Credit assets, expenses, losses and debit all liabilities, capital, revenue and gains.

To prepare: Journal entries.

Explanation of Solution

a.

The merchandise sold on credit:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Accounts Receivables		1,345,434
	Sales			1,345,434
	(Record the credit sales)

Table (1)

• Account receivable account is an asset account and it record an increase, hence it is debited.

• Sales account is a revenue account, it records an increase, and hence it is credited.

Cost of goods sold:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Cost of Goods Sold		975,000
	Merchandise Inventory			975,000
	(Record cost of goods sold)

Table (2)

• Cost of goods sold is an expense account, it records an increase, and hence it is debited.

• Merchandise inventory account is an asset account and it decreases, hence it is credited.

b.

Write off an uncollectible account:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Allowance for Doubtful Accounts		18,300
	Accounts Receivables			18,300
	(Write off an uncollectible accounts)

Table (3)

• Allowance for doubtful account is a contra asset account and it reduces the accounts receivable account to its realizable value, hence it is debited.

• Account receivable account is an asset account and it record a decrease, hence it is credited.

c.

Payment received from debtor:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Cash		669,200
	Accounts Receivables			669,200
	(Write off an uncollectible accounts)

Table (4)

• Cash account is an asset account and it record an increase, hence it is debited.

• Account receivable account is an asset account and it record a decrease, hence it is credited.

d.

Adjustment entry of an uncollectible account:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Bad Debt Expenses		28,169
	Accounts Receivables			28,169
	(Write off an uncollectible accounts)

Table (5)

• Bad debt expenses account is an expense account and it increases, hence it is debited.

• Account receivable account is an asset account and it record a decrease, hence it is credited.

e.

The merchandise sold on credit:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Accounts Receivables		1,525,634
	Sales			1,525,634
	(Record the credit sales)

Table (6)

• Account receivable account is an asset account and it record an increase, hence it is debited.

• Sales account is a revenue account, it records an increase, and hence it is credited.

Cost of goods sold:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Cost of Goods Sold		1,250,000
	Merchandise Inventory			1,250,000
	(Record cost of goods sold)

Table (7)

• Cost of goods sold is an expense account, it records an increase, and hence it is debited.

• Merchandise inventory account is an asset account and it decreases, hence it is credited.

f.

Write off an uncollectible account:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Allowance for Doubtful Accounts		27,800
	Accounts Receivables			27,800
	(Write off an uncollectible accounts)

Table (8)

• Allowance for doubtful account is a contra asset account and it reduces the accounts receivable account to its realizable value, hence it is debited.

• Account receivable account is an asset account and it record a decrease, hence it is credited.

g.

Payment received from debtor:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Cash		1,204,600
	Accounts Receivables			1,204,600
	(Write off an uncollectible accounts)

Table (9)

• Cash account is an asset account and it record an increase, hence it is debited.

• Account receivable account is an asset account and it record a decrease, hence it is credited.

h.

Adjustment entry of an uncollectible account:

Date	Account Title and Explanation	Post ref.	Debit ($)	Credit ($)
	Bad Debt Expenses		32,199
	Accounts Receivables			32,199
	(Write off an uncollectible accounts)

Table (10)

• Bad debt expenses account is an expense account and it increases, hence it is debited.

• Account receivable account is an asset account and it record a decrease, hence it is credited.