Question
Mimmy Company uses the Income Statement approach to estimate the uncollectible accounts receivable. During the current year, the following transactions occurred: Sept 7 $2,500 account
Mimmy Company uses the Income Statement approach to estimate the uncollectible accounts receivable. During the current year, the following transactions occurred: Sept 7 $2,500 account receivable of Jim was bankrupt and was written off. Oct 15 Another $8,100 account receivable of Jack was found to be uncollectible and written off. Nov 9 Jack suddenly came up and paid $6,000 of the amount to Mimmy Company unexpectedly. Dec 31 Mimmy Company estimated 0.5% of its $1,900,000 of credit sales would be uncollectible.
Required: (a) Prepare the general journal entries to record these transactions. (10 marks) (b) If the balance of the Allowance for Impairment account was $8,000 (Cr) on January 1 of the current year, determine the balance of the allowance for uncollectible accounts at December 31 of the current year. Assume that the transactions above are the only transactions affecting the allowance for impairment accounts during the year. Show your workings.
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