Question

For each of the following, prepare journal entries 1) A company has accounts receivable of $80,000...

For each of the following, prepare journal entries

1) A company has accounts receivable of $80,000 and a credit balance in its allowance for doubtful accounts of $600. The company estimates that its uncollectible accounts are 2% of accounts receivable.

2) A company had FV-OCI investments that were purchased for $40,000. The fair value of the investments at the end of the year is $48,000.

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Answer #1

Journal Entries:

Particulars Debit Credit

1.Uncollected A/c expense(70000*2%) 1400

Provision for Doubtful Debts 1400

(Being Allowance of 2% doubtful debts recorded)

Note:Provision of doubtful debts includes Actual bad debts written off which is 800(1400-600)(Uncollected A/C expense-Credit balance) which is less than Provision for doubtful debts(1400) and it also includes credit balance(Extra Estimation for doubtful debts) which is 600. In this way the provision for doubtful debts is 1400.

2. FV-OCI Investment A/c(48000-40000) 8000

Unrealized gain on Investment (OCI) 8000

(Being Other comprehensive Income or Unrealized gain on Investment recorded).

PLEASE UPVOTE IF YOU FIND THE SOLUTION HELPFUL.   

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