Chapter 1 Problem 5-20
1. Accounts receivable – December 31, 2007 600,000
Add: Sales for 2008 5,000,000
Recovery of accounts written off 10,000 5,010,000
Total 5,610,000
Less: Collection from customers 4,360,000
Accounts written off 50,000
Accounts settled by issuance of note 200,000 4,610,000
Accounts receivable – December 31, 2008 1,000,000
2. Allowance for doubtful accounts – December 31, 2007 30,000
Add: Recovery of accounts written off 10,000
Total 40,000
Less: Accounts written off 50,000
Allowance before adjustment – December 31, 2008 (debit balance) (10,000)
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3. Required allowance – December 31, 2008
On current accounts (700,000 x 5%) 35,000
On past due accounts (300,000 x 20%) 60,000
Total 95,000
4. Required allowance – December 31, 2008 95,000
Add: Debit balance before adjustment 10,000
Increase in allowance 105,000
5. Doubtful accounts 105,000
Allowance for doubtful accounts 105,000
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