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The red ones are incorrect Majestic Equipment Sales Company, which sells only on account, had a $131,000 balance in its Accounts Receivable and a $5,000
The red ones are incorrect
Majestic Equipment Sales Company, which sells only on account, had a $131,000 balance in its Accounts Receivable and a $5,000 credit balance in its Allowance for Doubtful Accounts on December 31, 2019. During 2020, the company's sales of equipment were $820,000 and its total cash collections from customers were $789,000. During the year, the company concluded that customers with accounts totalling $6,800 would be unable to pay, and wrote these receivables off. However, one of these customers subsequently made a payment of $850. (Note that this amount is not included in the cash collections noted above.) At the end of 2020, management decided that it would use an estimate for bad debts of 1% of its credit sales. Prepare the journal entries to record all the 2020 transactions, including the adjustment for bad debts expense at year end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account tities and enter for the amounts.) Account Titles and Explanation Debit Credit Accounts Receivable 131000 Sales Revenue 131000 (To record sales) Cash 79600000 79600000 Accounts Receivable (To record cash collected from customers) Allowance for Doubtful Accounts 600000 600000 Accounts Receivable (To write off accounts receivable) Accounts Receivable 85000 85000 Allowance for Doubtful Accounts (To reinstate an account that were previously written off) Cash 85000 Accounts Receivable (To record recovery of account that were previously written off) Bad Debts Expense 147000 147000 Allowance for Doubtful Accounts (To recognize the bad debts expense)Step by Step Solution
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