During Burns Company's first year of operations, credit sales totaled $156,000 and collections on credit sales totaled $113,000. Burns estimates that bad debt losses will be 1.0% of credit sales. By year-end, Burns had written off $380 of specific accounts as uncollectible. Required: 1. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense. 2. Show the year-end balance sheet presentation for accounts receivable.

(1) A journal was prepared for Burns company for their first year operations. (2) The end of year balance sheet for account receivable was also prepared which had a net account receivable of $41,440.

Explanation:

Solution

(1) The first step is to prepare a Journal entries relative to uncollectable accounts and bad debts expense which is stated as follows:

Bad debt Credit sales * percentage

The bad debt amount $156,000 1.0%

Total $1560

The estimated bad deb loss becomes:

Debit Credit

The debt expense account (dr) $1560

Allowance for uncollectable of accounts $1560

For writing off a 380 to a particular uncollectible accounts:

Debit Credit

Allowance for uncollectable of accounts $380

To the account receivable $380

(2) The year end - balance accounts receivable is shown below:

The year end balance sheet presentation:

The account receivable = $156,000 - $113,000 = $43,000

The account receivable for the uncollactable amount = $43,000 - $380 = $42,620

The less amount for uncollactable sum or amount = $1560 - $380 = $1,180

The net account receivable = $42,620 - $1180 = $41,440