Answer:
Underwood Corporation
Journal Entries:
Debit Credit
June 12, 2021:
Accounts Receivable $38,600
Service Revenue $38,600
To record services to customers on account
Sept. 17, 2021:
Cash Account $23,000
Accounts Receivable $23,000
To record cash receipt from customers.
Dec. 31, 2021:
Uncollectible Accounts Exp $7,020
Allowance for Doubtful Accounts $7,200
To record allowance for doubtful accounts.
March 4, 2022:
Accounts Receivable $53,600
Service Revenue $53,600
To record services to customers on account.
May 20, 2022:
Cash Account $10,000
Accounts Receivable $10,000
To record cash receipts from customers.
July 2, 2022:
Allowance for Doubtful Accounts $5,600
Accounts Receivable $5,600
To write off the uncollectible balance.
Oct. 19, 2022:
Cash Account $43,000
Accounts Receivable $43,000
To record cash receipts from customers.
Dec. 31, 2022:
Uncollectible Accounts Exp $3,170
Allowance for Doubtful Accounts $3,170
To record allowance for doubtful accounts.
b) Posting Transactions to the accounts:
Cash Account
Debit Credit Balance
Sept 17, 2021: Accounts Receivable $23,000 $23,000
May 20, 2022:Accounts Receivable $10,000 $33,000
Oct. 19, 2022: Accounts Receivable $43,000 $76,000
Accounts Receivable
Debit Credit Balance
June 12, 2021 Service Revenue $38,600 $38,600
Sept 17, 2021 Cash $23,000 $15,600
March 4, 2022 Service Revenue $53,600 $69,200
May 20, 2022 Cash $10,000 $59,200
July 2, 2022 Allowance for Uncollectible $5,600 $53,600
Oct. 19, 2022 Cash $43,000 $10,600
Allowance for Uncollectible Accounts
Debit Credit Balance
Dec. 31, 2021 Uncollectible Accounts Expense $7,200 $7,200
July 2, 2022 Accounts Receivable $5,600 $1,600
Dec 31, 2022 Uncollectible Accounts Expense $3,170 $4,770
3. Net Realizable Value of Accounts Receivable at the end of 2021 and 2022:
2021 2022
Accounts Receivable Balance $15,600 $10,600
less Allowance for Doubtful Accounts ($7,200) ($4,770)
Net Realizable Value $8,400 $5,830
Explanation:
a) Allowance for Doubtful is an amount that is estimated which may not be recovered from customers for services rendered. This allowance is made in order to provide for losses that may arise from credit sales. The estimated allowance is 45% of the Accounts Receivable Balance at the end of the year.
b) When a write-off of debts occurs, the Allowance for Doubtful Accounts is adjusted with the direct write-off to reduce the balance.
