The balance sheet of Bonita Company at December 31, 2016, includes the following. Notes receivable $36,200 Accounts receivable 195,800 Less: Allowance for doubtful accounts 20,700 $211,300 Transactions in 2017 include the following. 1. Accounts receivable of $142,700 were collected including accounts of $69,300 on which 3% sales discounts were allowed. 2. $5,920 was received in payment of an account which was written off the books as worthless in 2016. 3. Customer accounts of $20,900 were written off during the year. 4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $23,200. This estimate is based on an analysis of aged accounts receivable. Prepare all journal entries necessary to reflect the transactions above

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Business

Finley Campos

27 July, 09:43

The balance sheet of Bonita Company at December 31, 2016, includes the following. Notes receivable $36,200 Accounts receivable 195,800 Less: Allowance for doubtful accounts 20,700 $211,300 Transactions in 2017 include the following. 1. Accounts receivable of $142,700 were collected including accounts of $69,300 on which 3% sales discounts were allowed. 2. $5,920 was received in payment of an account which was written off the books as worthless in 2016. 3. Customer accounts of $20,900 were written off during the year. 4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $23,200. This estimate is based on an analysis of aged accounts receivable. Prepare all journal entries necessary to reflect the transactions above

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Bradley Carrillo · Answer 1

To record cash received on Accounts Receivable

Debit: Cash 140,621

Debit: Sales Discount 2079

Credit: Accounts Receivable 142,700

Bad Debts Recovered

Part 1

Debit: Bank 5,920

Credit: Bad Debts Recovered Account 5,920

Part 2

Debit: Bad Debts Recovered Account 5,920

Credit: Profit & Loss Account 5,920

Customer Account written off

Debit: Bad Debts 20,900

Credit: Accounts Receivable 20,900

Allowance for Doubtful Accounts (Increase in Allowance[23200-20700])

Debit: Allowance for Doubtful Debts Accounts 2500

Credit: Accounts Receivable 2500

Explanation:

1. Accounts receivable of $142,700 were collected including accounts of $69,300 on which 3% sales discounts were allowed.

3% on 69,300 was calculated to arrive at 2,079

2. $5,920 was received in payment of an account which was written off the books as worthless in 2016.

This was an account already written off as Bad debt. The bad debt entry initially posted would have affected the Profit and Loss. Two journals were needed to recover it from the Bad debt account and recognise it as income again.

3. Customer accounts of $20,900 were written off during the year.

This was an entry recorded directly as Bad debt account.

4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $23,200.

This was an increase on the previous balance. As such Accounts Receivable is decreased while Provision for Doubtful debt is increased with the difference.