On February 28, Tradewinds Sailing Supplies had a ($ 75,000) debit balance in Accounts Receivable and a
Question:
On February 28, Tradewinds Sailing Supplies had a \(\$ 75,000\) debit balance in Accounts Receivable and a \(\$ 2,200\) credit balance in Allowance for Uncollectible Accounts. During March, Tradewinds made
- Sales on account, \(\$ 410,000\)
- Collections on account, \(\$ 419,000\)
- Write-offs of uncollectible receivables, \(\$ 7,000\)
Requirements
1. Record sales and collections on account. Then record uncollectibleaccount expense and write-offs of customer accounts using the allowance method. Uncollectible-account expense was estimated at \(2 \%\) of credit sales. Show all March activity in Accounts Receivable, Allowance for Uncollectible Accounts, and Uncollectible-Account Expense (post to these T-accounts).
2. Suppose Tradewinds used a different method to account for uncollectible receivables. Record sales and collections on account. Then record uncollectible-account expense for March using the direct writeoff method. Post to Accounts Receivable and Uncollectible-Account Expense and show their balances at March 31.
3. What amount of uncollectible-account expense would Tradewinds report on its March income statement under each of the two methods? Which amount better matches expense with revenue? Give your reason.
4. What amount of net accounts receivable would Tradewinds report on its March 31 balance sheet under each of the two methods? Which amount is more realistic? Give your reason.
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