Question

Our Business is Required to Report the DEC-31 Balance Sheet and other Financial Statements using GAAP Rules to the Bank.

Our Business is reviewing the Accounts Receivable Account, using the Allowance Method.

1. Jan 1 The Beginning Balance in the Accounts Receivable Account was $300,000

2. Jan 1 The Beg Balance in the Allowance for Uncollectible Accounts was $30,000, Credit Balance.

3. During the Year Sales Revenues on Account were $3,000,000.

4. During the Year Cash Collected from Customers was $2,500,000.

5. During the Year The Corp wrote off Customers Accounts in the Amount of $25,000.

6. At DEC-31 We need to make a Journal Entry to record the Year End (Dec-31) Allowance for Un-Collectible Amounts using an Estimate that is Equal to 4% of the Ending Accounts Receivable Balance, that is estimated We will not Collect.

Answer 1

	Accounts Receivable, gross				$ 7,75,000.00
Less:	Allowance for Uncollectible Accounts				$    31,000.00
	Accounts Receivable, net					$ 7,44,000.00

Accounts Receivable
Beginning Balance	$   3,00,000.00	Cash	$ 25,00,000.00
Sales	$ 30,00,000.00	Write Off	$      25,000.00
		Ending Balance	$   7,75,000.00
	$33,00,000.00		$33,00,000.00

Allowance for Uncollectible Accounts
Write Off	$ 25,000.00	Beginning Balance	$ 30,000.00
Ending Balance	$ 31,000.00	Bad Debt Expense	26000
	$56,000.00		$56,000.00

Workings:

Estimated amount of uncollectible				=	$ 775000 x 4%
				=	$ 31,000.00
As there is already $ 5000 credit balance left in the Allowance account,
we need to credit the balance figure, which is $ 31000 - $ 5000 = $ 26000