Wilson Leather Products sells leather clothing at both wholesale and retail. The company has found that there

Question:

Wilson Leather Products sells leather clothing at both wholesale and retail. The company has found that there is a higher rate of uncollectible accounts from retail credit sales than from wholesale credit sales. Wilson computes its estimated loss from uncollectible accounts at the end of each year. The amount is based on the rates of loss that the firm has developed from experience for each division. A separate computation is made for each of the two types of sales. The firm uses the percentage of net credit sales method.

As of December 31, 2019, Accounts Receivable has a balance of $804,000, and Allowance for Doubtful Accounts has a debit balance of $852. The following table provides a breakdown of the credit sales for the year 2019 and the estimated rates of loss:

Estimated Rate of Loss 0.6% 1.1 Amount Category Wholesale Retail $4,280,000 1,200,000


INSTRUCTIONS

1. Compute the estimated amount of uncollectible accounts expense for each of the two categories of net credit sales for the year.

2. Prepare an adjusting entry in general journal form to provide for the estimated uncollectible accounts on December 31, 2019. Use Uncollectible Accounts Expense.

3. Show how Accounts Receivable and Allowance for Doubtful Accounts should appear on the balance sheet of Wilson Leather Products as of December 31, 2019.

4. On January 20, 2020, the account receivable of Columbus Clothiers, amounting to $1,860, is determined to be uncollectible and is to be written off. Record this transaction in the general journal.

5. On November 26, 2020, the attorneys for Wilson turned over a check for $1,860 that they obtained from Columbus Clothiers in settlement of its account, which had been written off on January 20. The money has already been recorded in the cash receipts journal. Give the general journal entry to reverse the original write-off.

Analyze: When the financial statements are prepared for the year ended December 31, 2019, what net accounts receivable should be reported?

Financial Statements
Financial statements are the standardized formats to present the financial information related to a business or an organization for its users. Financial statements contain the historical information as well as current period’s financial...
Accounts Receivable
Accounts receivables are debts owed to your company, usually from sales on credit. Accounts receivable is business asset, the sum of the money owed to you by customers who haven’t paid.The standard procedure in business-to-business sales is that...
Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

College Accounting Chapters 1-30

ISBN: 978-1259631115

15th edition

Authors: John Price, M. David Haddock, Michael Farina

Question Posted: