Question
AR problem using the Percent of Sales Method The A/R Account had a $45,000 debit balance on Jan 1 The Allowance for Doubtful Accounts had
AR problem using the Percent of Sales Method
The A/R Account had a $45,000 debit balance on Jan 1
The Allowance for Doubtful Accounts had a 4,000 credit balance on Jan 1.
Credit Sales Rev Reported each Month were:
225,000 in Jan 290,000 in Feb
Cash Collection from AR customers each month were:
210,000 collected in Jan 276,350 collected in Feb
Writeoffs of uncollectible accounts in each month were:
3,800 written off in Jan 6,100 written off in Feb
A/R account balance at the end of each month were:
56,250 on Jan 31 63,800 on Feb 28
Assume that this company used the % of sales method to estimate its bad debts
Bad Debts are estimated on a monthly basis by figurnig 2% of credit sales.
1. Prepare the adjusting JE for estimated bad debt ex as of Jan 31 and Feb 28
2.Show the T account for the allowance for Doubtful Accounts as for Jan and Feb
3.Show the Balace Sheet Presentation for A/R as of Jan 31 and Feb 28
Hint: For 3. the balance sheet presentation must show the net A/R- this is the A/R balance less the Allowance balance. You must find the endning Allowance balance in 2.
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