Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

The bookkeeper of Vital Inc. has asked you to assist him with &*^^^% the preparation of information about the company's accounts receivable for presentation in

The bookkeeper of Vital Inc. has asked you to assist him with &*^^^% the preparation of information about the

company's accounts receivable for presentation in the statement of financial position at December 31,

2018, the end of the company's fiscal year. The following details have been extracted from the company's

files:

Debit Accounts receivable, January 1, 2018 $500,000

Credit Allowance for doubtful accounts, January 1, 2018 $25,000

Sales for 2018 totalled $1,300,000; $300,000 were in cash and the rest on account. The company

collected $1,100,000 from credit customers during 2018 and wrote off $30,000 of accounts receivable as

uncollectible.

Required:

1.

Determine the balance of accounts receivable at December 31, 2018.

2.

Vital estimates that 6 percent of the ending balance of its accounts receivable may not be collected

in the future. Prepare the journal entries to record the write-off of accounts receivable and the bad

debt expense for 2018.

3.

Show how the information related to accounts receivable is presented on the company's statement

of financial position as at December 31, 2018.

4.

After you finished helping the bookkeeper with the journal entries and the statement of financial

position presentation, he said, "These calculations seem to be complicated. Would it not be

simpler to treat the $30,000 as bad debt expense when the company is certain that the customers

are not able to pay the amount owed? That way, you record the exact amount of bad debt when it

happens, and you do not have to estimate an amount of doubtful accounts and risk being

incorrect." Prepare response to the bookkeeper.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Fundamentals Of Financial Accounting

Authors: Fred Phillips, Robert Libby, Patricia A Libby

3rd Edition

0073527106, 9780073527109

More Books

Students also viewed these Accounting questions

Question

1. Effort is important.

Answered: 1 week ago