Question

At the beginning of 2016, EZ Tech Company's Accounts Receivable balance was $140,000, and the balance in Allowance for Doubtful Accounts was $2,350 (Cr.). EZ Tech's sales in 2016 were $1,050,000, 80% of which were on credit. Collections on account during the year were $670,000. The company wrote off $4,000 of uncollectible accounts during the year. Prepare summary journal entry related to the (a) sale during 2016.

Answer 1

Answer:

EZ Tech Company

Journal Entries:

Debit Cash Account $210,000

Credit Sales Revenue $210,000

To record sale of goods for cash.

Debit Accounts Receivable $840,000

Credit Sales Revenue $840,000

To record sale of goods on account.

Debit Cash Account $670,000

Credit Accounts Receivable $670,000

To record the receipt of cash on account.

Debit Uncollectible Expense $4,000

Credit Accounts Receivable $4,000

To record direct write-off of uncollectibles.

Explanation:

a) Accounts Receivable:

Beginning balance $140,000

Sales on credit         840,000

Cash receipts         -670,000

Uncollectible              -4,000

Ending balance    $306,000

b) The direct write-off of the uncollectible accounts could have also been treated through the Allowance for Doubtful Accounts by debiting the account before crediting it with the Uncollectible Expense account.  Since there is no instruction to the contrary, we have used the direct method instead, for simplicity.