Chapter 9, Problem 9.9P

Aging of Accounts Receivable, Write-Offs, Factoring with Recourse, Journal Entries.

Astro Carpets Incorporated provided the following accounts related to beginning balances in its accounts receivable and allowance accounts for the current year:

Prepare the journal entries to record the following transactions that occurred during the current year. Prepare a schedule for both accounts receivable and the allowance for uncollectible accounts that shows the beginning balances, the various items that change the beginning balance, and the ending balance.

Required

1. a. Credit sales for the year amounted to $12,346,976. Ignore cost of goods sold and the reduction of inventory
2. b. Several customers returned merchandise sold on account and unpaid, totaling $975,613 (retail value) Ignore cost of goods sold and the increase in inventory.
3. c. Astro wrote off $567,890 of uncollectible accounts from Jones Inc.
4. d. Astro sold $1,450,000 of its accounts receivable to Siegal Capital with recourse. Siegal charged a fee equal to 8% of the receivables factored and held back an additional 2% as security. Siegal will return the hold back to Astro when the receivables are collected. The estimated recourse liability is $15,000. This transaction qualifies as a sale
5. e. The company recovered $25,675 of accounts receivable written off two years ago from Smith Industries.
6. f. The company recorded the bad debt expense for the year Astro estimates its uncollectible accounts at 16% of accounts receivable Round to the nearest dollar