Question

May 24 Sold merchandise on account to Old Town Cafe $18,450. The cost of goods sold was $11,000. Sept. 30 Received $6,000 from Old Town Cafe and wrote off the remainder owed on the sale of May 24 as uncollectible. Dec. 7 Reinstated the account of Old Town Cafe that had been written off on September 30 and received $12,450 cash in full payment. Journalize the above transactions in the accounts of Zippy Interiors Company, a restaurant supply company that uses the allowance method of accounting for uncollectible receivables. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Answer and Explanation:

Journal entries

May 24

Dr Account Receivable Old Town Cafe $18,450

Cr Sales $18,450

To record sales on merchandise on account

May 24,

Dr Cost of merchandise sold $11,000

Cr Merchandise inventory $11,000

To record the cost of goods sold

Sept 30

Dr Cash $6,000

Dr Allowance for doubtful accounts $12,450

Cr Account Receivable Old Town Cafe $18,450

To record cash collection written off uncollectible account receivable

Written off uncollectible account receivable

$12,450($18,450-$6,000)