Question

At the beginning of the year, Portal Company had the following accounts on its books:

Accounts Receivable...……………………………………………………………$140,000 (debit)
Allowances for doubtful accounts...………………………………………………$8,000 (credit)
During the year, credit sales were 1,173,000 and collections on account wee $1,175,000. The following transactions, among others, occurred during the year:
Feb. an 17 wrote off R. Lowell's account $4,000.
May 28 wrote off G. Boyd's account, $3,400.
Oct. 13 Received $600 from G. Boyd, who is in bankruptcy proceedings, in final settlement of the account written off on May 28. This amount is not included in the $1,17500 collections.
Dec 15 Wrote off K. Marshall's account, $1,600.
31 In a adjusting entry, recorded the allowance for doubtful accounts at 0.9% of credit sales for the year.
Required
a. prepare journal entries to record the credit sales, the collections on account, and the preceding transactions and adjustments.
b. Show how Accounts Receivable and the allowance for doubtful accounts would appear on the December 31 balance sheet

Answer 1

Journal entries include recording credit sales, collections, write-offs, and adjustments for doubtful accounts. On the balance sheet, Accounts Receivable would be $1,313,000 and Allowance for Doubtful Accounts would be $11,157, leading to a net Accounts Receivable of $1,301,843.

Step-by-step explanation:

To address the student's request, we must prepare journal entries for each transaction and adjustment, and then show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet.

Journal Entries:

• 
  
• Credit Sales: Debit Accounts Receivable $1,173,000; Credit Sales $1,173,000.
• 
  
• Collections on Account: Debit Cash $1,175,000; Credit Accounts Receivable $1,175,000.
• 
  
• Write-off of R. Lowell's Account: Debit Allowance for Doubtful Accounts $4,000; Credit Accounts Receivable $4,000.
• 
  
• Write-off of G. Boyd's Account: Debit Allowance for Doubtful Accounts $3,400; Credit Accounts Receivable $3,400.
• 
  
• Recovery of G. Boyd's Account: Debit Cash $600; Credit Allowance for Doubtful Accounts $600.
• 
  
• Write-off of K. Marshall's Account: Debit Allowance for Doubtful Accounts $1,600; Credit Accounts Receivable $1,600.
• 
  
• Adjusting Entry for Allowance for Doubtful Accounts: Debit Bad Debt Expense $10,557 (0.9% of $1,173,000); Credit Allowance for Doubtful Accounts $10,557.

Balance Sheet Presentation as of December 31:

• 
  
• Accounts Receivable: $1,313,000 ($140,000 + $1,173,000 - $4,000 - $3,400 - $1,600)
• 
  
• Allowance for Doubtful Accounts: $11,157 ($8,000 + $10,557 - $4,000 - $3,400 + $600)

Thus, the net Accounts Receivable that would appear on the balance sheet is $1,301,843 ($1,313,000 - $11,157).

Answer 2

To record the credit sales, collections, and adjustments, various journal entries need to be prepared. On the balance sheet, Accounts Receivable would show a debit balance of $140,000, while the Allowance for Doubtful Accounts would show a credit balance of $8,000.

Step-by-step explanation:

To answer this question, we need to prepare journal entries for the credit sales, collections on account, and the specified transactions and adjustments.

A. Journal Entries:

• Credit sales: Debit Accounts Receivable and credit Sales
• Collections on account: Debit Cash and credit Accounts Receivable
• Transaction on Feb. 17: Debit Allowance for Doubtful Accounts and credit Accounts Receivable
• Transaction on May 28: Debit Allowance for Doubtful Accounts and credit Accounts Receivable
• Transaction on Oct. 13: Debit Cash and credit Allowance for Doubtful Accounts
• Transaction on Dec 15: Debit Allowance for Doubtful Accounts and credit Accounts Receivable
• Adjusting entry on Dec 31: Debit Bad Debt Expense and credit Allowance for Doubtful Accounts

B. Balance Sheet Presentation:

Accounts Receivable would appear as $140,000 (debit) on the balance sheet, and Allowance for Doubtful Accounts would appear as $8,000 (credit).

Net Realizable Value (AR - Allowance) would be $132,000.