The following information was reported in Beckford Company’s general ledger at August 31:
All sales were made on account. At the beginning of the year, uncollectible accounts were estimated to be 6% of accounts receivable. At the end of the year, uncollectible accounts were estimated to be 7% of accounts receivable.
Instructions
Determine the missing amounts in Beckford Company's accounts. State what each of these amounts represents. You will not be able to determine the missing items in alphabetical order. (To solve this problem, it might help if you reconstruct the journal entries.)
SOLUTION
| Accounts Receivable | |
|---|---|
| Beg. Bal. 360,000 | Collections 2,545,000 |
| Sales (a) 2,633,540 | Write-offs (d) 28,540 |
| Rev. Write-off (b) 5,520 | Note 1 5,520 |
| End Bal. (c) 420,000 | |
Note 1 Collection of account previously written off
| Allowance for Doubtful Accounts | |
|---|---|
| Beg. Bal. (e) 21,600 | |
| Rev. write-off (b) 5,520 | |
| Write-offs 28,540 | Bad debts (f) 30,820 |
| End. Bal. 29,400 | |
| Sales | |
|---|---|
| Sales (a) 2,633,540 | |
| Bad Debts Expense | |
|---|---|
| (f) 30,820 | |
Beginning balance of the Allowance for Doubtful Accounts is 6% of the beginning balance of Accounts Receivable of $360,000 ($360,000 × .06) = $21,600 (e).
Ending balance of the Allowance for Doubtful Accounts of $29,400 is 7% of the ending balance of Accounts Receivable (c) of $420,000 ($29,400 ÷ .07).
Allowance for Doubtful Accounts 28,540
Accounts Receivable (d) 28,540
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