Question

You are in the process of preparing the journal entries for Sailwork Services. Total sales revenue information for the year included credit sales of $270,000 and cash sales of $30,000. Sailwork Services uses the allowance method to measure bad debts.

Collections on account during the year were $260,000 and $500 of specific accounts receivable were identified as never being collectible as the customer had filed for bankruptcy.

Sailwork began the current year with an account receivable debit balance of $30,500 and an allowance for doubtful accounts debit balance of $100. The accounts receivable sub-ledger reveals the following aging at the end of the year:

Aged Accounts Receivable

                                           0-30 days    31-60 days      61-90 days      >90 days                    Total

A/R subtotals                     $17,000       $4,000               $2,400           $16,600                       $40,000

Estimated % uncollectible   1%                2%                     8%               40%                                 

1) Record the following journal entries for the year (explanations are not required):

1. All sales for the year                                                                                                                    

2. Collection of account receivables                                                                                           

3. Bad debt expense using the percent of sales method based on 2.5% of credit sales were uncollectable.                                                                                                                                                  

4. Bad debt expense assuming the aging-of-receivables method was used instead of the percent of sales method.                                                                                                                                  

5. A/R from High Risk Corporation in the amount of $50 is determined not to be collectible.       

Answer 1