Question

During Burns Company's first year of operations, credit sales totaled $156,000 and collections on credit sales totaled $113,000. Burns estimates that bad debt losses will be 1.0% of credit sales. By year-end, Burns had written off $380 of specific accounts as uncollectible. Required: 1. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense. 2. Show the year-end balance sheet presentation for accounts receivable.

Answer 1

Answer:

(1)A journal was prepared for Burns company for their first year operations. (2)The end of year balance sheet for account receivable was also prepared which had a net account receivable of $41,440.

Explanation:

Solution

(1) The first step is to prepare a Journal entries relative to uncollectable accounts and bad debts expense which is stated as follows:

Bad debt                                           Credit sales * percentage

The bad debt amount                      $156,000  1.0%

Total                                                                 $1560

The estimated bad deb loss becomes:

                                                                          Debit          Credit

The debt expense account (dr)                        $1560

Allowance for uncollectable of accounts                        $1560

For writing off a 380 to a particular uncollectible accounts :

                                                                              Debit        Credit

Allowance for uncollectable of accounts           $380

To the account receivable                                                     $380

(2) The year end - balance  accounts receivable is shown below:

The year end balance sheet presentation:

The account receivable= $156,000 - $113,000 = $43,000

The account receivable for the uncollactable  amount = $43,000 - $380 = $42,620

The less amount for uncollactable sum or amount = $1560 - $380 = $1,180

The net account receivable = $42,620 -$1180 = $41,440