Question

During 2024, Lake Lucerne Company completed the following transactions:

1) Sales revenue on account, $113,600 (ignore Cost of Goods Sold).
2) Collections on account, $92,895
3) Write-offs of uncollectibles, $760.

Answer 1

The student's question pertains to the Lake Lucerne Company's 2024 accounting transactions which involve sales on account, collections, and write-offs of uncollectibles. These transactions are essential for recording a company's accounts receivable and financial performance.

Step-by-step explanation:

The question at hand is related to accounting transactions for a company called Lake Lucerne Company during the year 2024. Specifically, the focus is on the recording of sales revenue on account, the collections on account, and the write-offs of uncollectible accounts.

Accounting for Sales Revenue

When a company makes a sale on account (i.e., on credit), it records the transaction by increasing (debiting) accounts receivable and increasing (crediting) sales revenue. This transaction does not affect cash immediately, but it does indicate that the company expects to collect cash in the future. In this scenario, the company recorded sales revenue on account amounting to $113,600.

Accounting for Collections on Account

Collections on account refer to the money received from customers who previously purchased goods or services on credit. When the company collects cash on these accounts, it will decrease (credit) accounts receivable and increase (debit) cash. Lake Lucerne Company collected $92,895 from its customers during the year 2024.

Accounting for Write-offs of uncollectibles

Sometimes, despite a company's best efforts, certain accounts receivable become uncollectible and must be written off. This means reducing (debiting) the allowance for doubtful accounts and reducing (crediting) accounts receivable. In this case, Lake Lucerne Company wrote off $760 as uncollectible.

All of these transactions affect the company's accounts receivable balance and its financial reporting. Sales on account increase accounts receivable, collections on account decrease it, and write-offs also decrease the balance of accounts receivable (through the allowance for doubtful accounts, if the company uses the allowance method for accounting for uncollectibles).