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17 August, 00:57

On June 30, Paisley Party Planners had a $35,000 balance in Accounts Receivable and a $3.252 credit balance in Allowance for Uncollectible Accounts. During July, Paisley made credit sales of $198,000. July collections on account were $169,000, and write-offs of uncollectible receivables totaled $2,890. Uncollectible-accounts expense is estimated as 4% of credit sales. No sales returns are expected.

Requirements:

1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible-account expense by the allowance method during July. Explanations are not required.

2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts, and Net Accounts Receivable at July 31. How much does Paisley expect to collect?

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Answers (1)
  1. 17 August, 01:06
    0
    1. The journal entries are as follows

    Account receivable Dr $198,000

    To Sales revenue $198,000

    Cash Dr $169,000

    To Account receivable $169,000

    Allowance for Uncollectible Accounts Dr $2,890

    To Account receivable A/c $2,890

    Bad debt expense Dr $7,920

    To Allowance for Uncollectible Accounts $7,920

    It is computed below:

    = Credit sales * estimated percentage

    = 4% * $198,000

    = $7,920

    2. The ending balance are as follows

    For Account receivable

    = Beginning balance + credit sales - cash collections - written off amount

    = $35,000 + $198,000 - $169,000 - $2,890

    = $61,110

    For Allowance for uncollectible accounts

    = Opening balance + bad debts - written off amount

    = $3,252 + $7,920 - $2,890

    = $8,282

    Now the net account receivable balance

    = Account receivable - Allowance for uncollectible accounts

    = $61,110 - $8,282

    = $52,828

    So, the expected collection is $52,828
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