Question
Selected account balances as at September 30, 20 J 7 for Glendale Inc., are shown below: Debit Credit Accounts receivable $119,000 Allowance for doubtful accounts
Selected account balances as at September 30, 20 J 7 for Glendale Inc., are shown below: Debit Credit Accounts receivable $119,000 Allowance for doubtful accounts $3,000 During October 2017, the following transactions occurred:
1.The company sold merchandise on account to various retailers for a total amount of $76,000, terms 2/10, n/30. A few retailers who purchased merchandise for a gross amount of $40,000 paid the amount due within 10 days. A total of$16,000 ofthe October sales remained unpaid at October 31, 2017. 2. Customers paid the company $50,000 for merchandise they purchased prior to September 30, 2017. These customers did not pay within the discount period. 3. Two of Glendale's customers owed the company a total of$5,000 and were facing financial difficulties during October due to increased competition. They were forced to close their businesses before the end of October 2017. Glendale does not expect to receive any money from these two customers and considers their accounts uncollectible. 4. The company received new kitchenware from a supplier for $40,000. The invoice indicated that the supplier would allow a cash discount of 1 percent if the invoice were paid before the end of October 2017. Glendale paid the supplier on November 10, 2017. Glendale estimates that 4 percent of its accounts receivable at October 31, 2017, will not be collected in the future. Required: I. Prepare the journal entries to record the transactions that occurred in October 2017, and any related adjusting journal entries at October 31, 2017, the end of Glendale's fiscal year. 2. Show how the information related to accounts receivable is presented on the company's statement of financial position at October 31, 2017. 3. The major shareholder of Glendale, Billy Beau, was reading through the company's statement of financial position and noticed the account allowance for doubtful accounts. He called Carol Jones, Glendale's accountant, and made the following statement: "Carol, I don't think we need to make a provision for doubtful accounts as it will reduce the amount of accounts receivable unnecessarily. I think we should wait until we are certain that we cannot collect from our customers before showing a reduction in the accounts receivable on the statement of financial position. This way, the accounts receivable balance will be more accurate. I would like you to make the necessary change to the financial statements before they are distributed to the other shareholders." Assume the role of Carol and prepare a response to Billy
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