Anonymous
Anonymous asked in Business & FinanceOther - Business & Finance · 7 years ago

# Accounting help needed. Can not get this question to save my life?

2. Eraesi Company, which uses the perpetual inventory system, began operations on January 1, 2010. At January 1, 2011, the Company reports the following balances.

During the year, the company completed the following transactions involving sales on credit, accounts receivable collections, and bad debts.

Accounts Receivable \$320,000.00

Cash \$600,000.00

Allowance for Doubtful accounts \$32,000.00

a. Sold goods worth \$3,475,000 on credit. The cost of these goods was \$2,800,000

b. Received \$3,150,000 cash from customers for the goods sold on credit.

c. Wrote off \$62,000 of uncollectible accounts receivable.

d. The company estimates that 10% of its accounts receivable will be uncollectible.

Required:

A. Record the journal entries for the above select transactions (7 Points).

B. Show how the accounts receivable and the allowance for doubtful accounts appear on the Dec 31, 2011 balance sheet (3 Points).

Relevance
• JKRB
Lv 7
7 years ago

a. Sold goods worth \$3,475,000 on credit. The cost of these goods was \$2,800,000

Dr Accounts Receivable 3,475,000

Cr Sales 3,475,000

Dr Cost of Goods Sold 2,800,000

Cr Merchandise Inventory 2,800,000

b. Received \$3,150,000 cash from customers for the goods sold on credit.

Dr Cash 3,150,000

Cr Accounts Receivable 3,150,000

c. Wrote off \$62,000 of uncollectible accounts receivable.

Dr Allowance for Doubtful Accounts 62,000

Cr Accounts Receivable 62,000

d. The company estimates that 10% of its accounts receivable will be uncollectible.

320,000 + 3,475,000 - 3,150,000 - 62,000 = \$583,000 balance in A/R account before adjustment

32,000 - 62,000 = - \$30,000 (debit) balance in the Allowance account before adjustment

583,000 x 10% = \$58,300 amount estimated to be uncollectible

58,300 + 30,000 (debit balance) = \$88,300 adjustment

Dr Bad Debt Expense 88,300

Cr Allowance for Doubtful Accounts 88,300

B. Show how the accounts receivable and the allowance for doubtful accounts appear on the Dec 31, 2011 balance sheet

Accounts receivable \$583,000

Less: Allowance for doubtful accounts 58,300

Net accounts receivable 524,700

Source(s): Accounting Fan