Question

Prepare journal entries to record the following transactions that occurred for this company in its 3rd year of operations. • Year 3 sales: $7,500,000 on account, $490,000 cash. • Year 3 collections of accounts receivable: $6,700,000. • Year 3 write-offs: $128,000 • Year 3 reinstatements and subsequent collections of reinstated accounts: $84,000 • 12/31/Y3: Year-end adjustment to record estimated uncollectible accounts at 4% of credit sales.

Directions: Prepare all journal entries, post to accounts, and show the year-end balance sheet presentation of accounts receivable. Calculate the NRV after each transaction listed above.

Answer 1

journal entries

1 cash a/c dr 490000

to sales a/c 490000

(cash sales)

account receivable a/c dr 7500000   

to sales a/c 7500000

(credit sales)

2 cash/bank a/c dr 6700000

to account receivable 6700000

(collection of account receivable)

3 profit and loss a/c dr 128000

to account receivable 128000

(account receivable write off)

4 cash/ bank a/c dr 84000

to account receivable 84000

(reinstatement of collection)

5 baddebt a/c dr 300000

to account receivable 300000

(uncollectable amount 4% of credit sale)

debtors a/c

to sales 7500000 by bank 6700000

by p/l a/c 128000

by cash/bank 84000

by baddebt 300000

by balance c/d(bf) 288000

7500000 7500000

balance sheet balancing figure is 288000