ACCOUNTS RECEIVABLE JOURNAL ENTRIES

The following accounts receivable activities of Vandalay Industries occurred during Year $2.$ Prepare $(1)$ the journal entries required, $(2)$ ensure that the basic accounting equation balances for each transaction, and $(3)$ post the activities to the T$-$accounts provided.

$($a$)$ Vandalay recorded $$300,000$ of sales; all sales are on account.

Accounts receivable $300000$

Sales revenue $300000$

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

$300000300000$

$($b$)$ Vandelay collected $$100,000$ on account.

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

$($c$)$ After many collection attempts, Vandalay determined $$10,000$ of accounts receivable from Pendant Publishing to be uncollectible and wrote$-$off this account.

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

HANDOUT $81($continued$)$

$($d$)$ Later in the year, Pendant Publishing called to say that they can now afford to pay $$7,000$ to settle their $$10,000$ debt in full. Vandelay agreed to these terms and received a $$7,000$ check from Pendant.

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

Post the journal entries above and determine the ending balance in the following T$-$accounts. The beginning account balances have been provided.

$+$ Accounts Receivable $($A$)$

Beg. Bal. $72,000$

$$ Allowance for Doubtful Accounts $($xA$)+$

$15,000$ Beg. Bal.

$$

ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS

AGING OF ACCOUNTS RECEIVABLE METHOD

Vandelay Industries reported total credit sales of $$300,000$ in Year $2.$ Management$$s aging of accounts receivable and estimates of uncollectible accounts at December $31,$ Year $2$ are provided below:

Customer Total Number of Days Unpaid

$0-3030-6060-90$ Over $90$

Alpha Sales $ $700$ $$700$

Gamma Manufacturing Co$.1,900$ $$1,900$

Delta Shipping Corp. $2,200$ $$2,200$

Epsilon Industries $6,000$ $$6,000$

Theta Manufacturing $1,8001,800$

Zeta Industries $600600$

Other customers $248,800140,10036,90029,80042,000$

Totals $$262,000$ $$142,000$ $$40,000$ $$32,000$ $$48,000$

Estimated Percentage $2\%4\%8\%20\%$

$($a$)$ Vandalay$$s allowance for doubtful accounts had an unadjusted credit balance of $$12,000$ at December $31,$ Year $2.$ Prepare the year$-$end adjusting journal entry to record bad debt expense $($using the aging of accounts receivable method$).$

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

Post the adjusting journal entry and determine the adjusted balance in the following T$-$accounts:

$+$ Bad Debt Expense $($E$)$

$$ Allowance for Doubtful Accounts $($xA$)+$

HANDOUT $82($continued$)$

$($b$)$ Assume instead that at December $31,$ Year $2,$ the company$$s allowance for doubtful accounts had an unadjusted debit balance of $$400.$ Prepare the year$-$end adjusting journal entry to record bad debt expense.

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

Post the adjusting journal entry and determine the adjusted balance in the following T$-$accounts:

$+$ Bad Debt Expense $($E$)$

$$ Allowance for Doubtful Accounts $($xA$)+$

ESTIMATION AND RECORDING OF UNCOLLECTIBLE ACCOUNTS

PERCENTAGE OF CREDIT SALES METHOD

Vandelay Industries reported total credit sales of $$300,000$ in Year $2.$ Based on prior experience, management estimates that $2\mathrm{.}5\%$ of credit sales will be uncollectible. At December $31,$ Year $2,$ the company$$s allowance for doubtful accounts had an unadjusted credit balance of $$12,000.$

$($a$)$ Prepare the year$-$end adjusting journal entry to record bad debt expense $($using the percentage of credit sales method$).$

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

Post the adjusting journal entry and determine the adjusted balance in the following T$-$accounts:

$+$ Bad Debt Expense $($E$)$

$$ Allowance for Doubtful Accounts $($xA$)+$

$($b$)$ Assume instead that at December $31,$ Year $2,$ the company$$s allowance for doubtful accounts had an unadjusted debit balance of $$400.$ Prepare the year$-$end adjusting journal entry to record bad debt expense.

Ensure the equation still balances and debits $=$ credits

Assets $=$ Liabilities $+$ Stockholders$$ Equity

HANDOUT $83($continued$)$

Post the adjusting journal entry and determine the adjusted balance in the following T$-$accounts:

$+$ Bad Debt Expense $($E$)$

$$ Allowa