At the beginning of the current period, Azim Enterprises Ltd. had balances in Accounts Receivable of $1,600,000 and in Allowance for Doubtful Accounts of $88,000 (credit). During the period, Azim had credit sales of $3,800,000 and collections of $4,084,000. It wrote off $116,000 of accounts receivable. However, an $8,000 account written off as uncollectible was recovered before the end of the current period. Uncollectible accounts are estimated to total $72,000 at the end of the period.
Instructions
(a) Prepare the entries to record sales and collections during the period.
(b) Prepare the entry to record the write off of the $116,000 accounts deemed uncollectible during the period.
(c) Prepare the entry(ies) to record the collection of the $8,000 account written off as part of the uncollectible accounts in part (b).
(d) Prepare the entry to record bad debts expense for the period.
(e) (1) Prepare T accounts for Accounts Receivable and Allowance for Doubtful Accounts, (2) enter the opening balances, (3) post the journal entries prepared in parts (a) through (d), and (4) determine the ending balances.
(f) Show the statement of financial position presentation of the receivables at the end of the period.
SOLUTION
(a) Accounts Receivable 3,800,000
Sales 3,800,000
Cash 4,084,000
Accounts Receivable 4,084,000
(b) Allowance for Doubtful Accounts 116,000
Accounts Receivable 116,000
(c) Accounts Receivable 8,000
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