Question
At the beginning of the year, Penman Company had the following account balances. Accounts receivable ........................ $576,000 Allowance for doubtful accounts (ADA) ........... 25,400 (credit)
At the beginning of the year, Penman Company had the following account balances. Accounts receivable ........................ $576,000 Allowance for doubtful accounts (ADA) ........... 25,400 (credit) During the year, Penmans credit sales were $2,508,000, and collections on accounts receivable were $2,163,000. The following additional transactions occurred during the year. Feb. 17 Wrote off Barassos account, $11,200. May 28 Wrote off Ricardos account, $4,800. Dec. 15 Wrote off Alejandros account, $2,900. Dec. 31 Recorded the bad debts expense assuming Penmans policy is to record bad debts expense as 1.1% of credit sales. (Hint: The allowance account is increased by 1.1% of credit sales regardless of write-offs.) Compute the ending balances in accounts receivable and the allowance for doubtful accounts. Show how Penmans December 31 balance sheet reports the two accounts: (i) accounts receivable and (ii) allowance for doubtful accounts (ADA).
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started