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12 December, 12:22

Assume the following information for Teal Mountain Corp.

Accounts receivable (beginning balance) $143,000

Allowance for doubtful accounts (beginning balance) 11,340

Net credit sales 930,000 Collections 912,000

Write-offs of accounts receivable 6,400

Collections of accounts previously written off 2,200

Uncollectible accounts are expected to be 6% of the ending balance in accounts receivable.

1. Prepare the entries to record sales and collections during the period.

2. Prepare the entries to record the recovery of the uncollectible account during the period.

3. Determine the ending balance in Accounts Receivable and the unadjusted balance in Allowance for Doubtful Account.

4. Prepare the entry to record bad debt expense for the period.

5. Determine the ending (adjusted) balance in Allowance for Doubtful Accounts.

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  1. 12 December, 13:10
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    Teal Mountain Corp.

    1. Entries to record sales and collections during the period:

    Debit Accounts Receivable $930,000

    Credit Sales Revenue $930,000

    To record credit sales.

    Debit Cash Account $912,000

    Credit Accounts Receivable $912,000

    To record cash collections.

    2. Entries to record recovery of the uncollectible account:

    Debit Cash Account $2,200

    Credit Allowance for doubtful accounts $2,200

    To record uncollectible previously written off

    3. Ending balance in Accounts Receivable and unadjusted balance in Allowance for Doubtful Account:

    Accounts Receivable

    Beginning balance $143,000

    Credit Sales 930,000

    Collections - 912,000

    Write-offs - 6,400

    Balance $154,600

    Allowance for Doubtful Accounts (Unadjusted)

    Beginning balance $11,340

    Uncollectible written off - 6,400

    Uncollectible collections 2,200

    Balance (unadjusted) $2,740

    4. Entry to record bad debt expense for the period:

    Debit Bad Expense $6,536

    Credit Allowance for Doubtful Accounts $6,536

    To bring the balance to $9,276.

    5. Adjusted ending balance in Allowance for Doubtful Accounts = $9,276

    Explanation:

    6% of accounts receivable = $154,600 x 6% = $9,276
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