Journal Entries:
a. To record sales:
Debit Accounts Receivable: $164,000
Credit Sales: $164,000
b. To record cash sales:
Debit Cash: $21,000
Credit Sales: $21,000
c. To record collections on account:
Debit Cash: $135,000
Credit Accounts Receivable: $135,000
d. To record write-offs of uncollectible receivables:
Debit Allowance for Bad Debts: $2,300
Credit Accounts Receivable: $2,300
T-Account Posting:
Accounts Receivable:
Beginning balance (Jan. 1, 2018): $28,000
Sales on account: $164,000
Collections on account: ($135,000)
Write-offs: ($2,300)
= Ending balance (Dec. 31, 2018): $54,700
Allowance for Bad Debts:
Beginning balance (Jan. 1, 2018): $3,000
Bad debts write-offs: $2,300 (from the adjustment)
= Ending balance (Dec. 31, 2018): $5,300
Adjustment for bad debts expense:
Estimated bad debts = 3% * $164,000 (credit sales) = $4,920
Bad debts expense:
Debit Bad Debts Expense: $4,920
Credit Allowance for Bad Debts: $4,920
Net Accounts Receivable on Dec. 31, 2018:
Accounts Receivable: $54,700
Allowance for Bad Debts: ($5,300)
Net Accounts Receivable = $54,700 - $5,300 = $49,400
The Complete Question
Accounting for uncollectible accounts using the allowance method (percent-of-sales) and reporting receivables on the balance sheet Learning Objectives 1,3 2. AR, Dec. 31 $54,700 Requirements 1. Journalize Hilltop's transactions that occurred during 2018. The company uses the allowance method. 2. Post Hilltop's transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts. 3. Journalize Hilltop's adjustment to record bad debts expense assuming Hilltop estimates bad debts as 3% of credit sales. Post the adjustment to the appropriate T- accounts. 4. Show how Hilltop Flagpoles will report net accounts receivable on its December 31, 2018, balance sheet. At January 1, 2018, Hilltop Flagpoles had Accounts Receivable of $28,000, and Allowance for Bad Debts had a credit balance of $3,000. During the year, Hilltop Flagpoles recorded the following: a. Sales of $185,000 ($164,000 on account; $21,000 for cash). Ignore Cost of Goods Sold. b. Collections on account, $135,000 c. Write-offs of uncollectible receivables, $2,300.