question archive A company started the year with accounts receivable of $30,000 and an allowance for uncollectible accounts of $(3,500)
A company started the year with accounts receivable of $30,000 and an allowance for uncollectible accounts of $(3,500)
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A company started the year with accounts receivable of $30,000 and an allowance for uncollectible accounts of $(3,500). During the year, sales (all on account) were $90,000 and cash collections for sales amounted to $82,000. Also, $3,400 worth of uncollectible accounts were specifically identified and written off. Then, at year end, the company estimated that 2% of ending accounts receivable would be uncollectible
Requirements
1. Record the transactions (including beginning balances) into the accounting equation
2. What amount will be shown on the year-end income statement for bad debts expense?
3. What is the balance in the allowance for uncollectible accounts after all adjustments have been made?
Reauirement 2. What amount will be shown on the vear-end income statement for bad debts expense?
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Answer:
| Assets | = | Liabilities | + | Contributed capital | + | Retained earnings | |||||
| $ | Account | $ | Account | $ | Account | $ | Account | ||||
| Beg. Bal | 30,000.00 | Accounts Receivable | = | + | + | ||||||
| -3,500.00 | Allowance for accounts receivable | = | + | + | |||||||
| 1 | 90,000.00 | Accounts Receivable | = | + | + | 90,000.00 | Sales revenue | ||||
| 2 | -82,000.00 | Accounts Receivable | = | + | + | ||||||
| 82,000.00 | Cash | = | + | + | |||||||
| 3 | -3,400.00 | Accounts Receivable | = | + | + | ||||||
| 3,400.00 | Allowance for accounts receivable | = | + | + | |||||||
| 4 | -592.00 | Allowance for accounts receivable | = | + | + | -592.00 | Bad debt expense | ||||
592 = 34,600*2% -3500+3400
= 692 - 3500 + 3400
= 592
Requirement 2:
The amount that will be shown on year end income statment for bad debt expenses = $592 (calculations shown above)
