Lemon company uses the balance sheet/aging approach to estimate uncollectible accounts receivable. Based upon recent collection history, Lemon’s accountant has prepared an aging of accounts receivable as of December 31, 2019, and has estimated uncollectible accounts receivable of $81,250 as of that date -ie ending balance of Allowance for Doubtful Accounts (ADA). Additional facts needed for questions 1 and 2 below The balance in the allowance for doubtful accounts (ADA) on January 1, 2019 (beg. balance) was $39,500. Accounts written off during 2019 amounted to $3,500 Instructions Prepare the entry to record the write off of $3,500 during 2019 Prepare the adjusting entry to record the uncollectible accounts expense for 2019 (considering that the ending balance in ADA is $81,250 as mentioned above). Determine the net accounts receivable (net realizable value) that will appear on Lemon’s 12/31/19 balance sheet (statement of financial position), if the (gross) accounts receivable balance on that date was $725,000
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At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.
Accounts Receivable
The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.
Lemon company uses the balance sheet/aging approach to estimate uncollectible accounts receivable. Based upon recent collection history, Lemon’s accountant has prepared an aging of accounts receivable as of December 31, 2019, and has estimated uncollectible accounts receivable of $81,250 as of that date -ie ending balance of Allowance for Doubtful Accounts (ADA).
Additional facts needed for questions 1 and 2 below
- The balance in the allowance for doubtful accounts (ADA) on January 1, 2019 (beg. balance) was $39,500.
- Accounts written off during 2019 amounted to $3,500
Instructions
- Prepare the entry to record the write off of $3,500 during 2019
- Prepare the
adjusting entry to record the uncollectible accounts expense for 2019 (considering that the ending balance in ADA is $81,250 as mentioned above). - Determine the net accounts receivable (net realizable value) that will appear on Lemon’s
12/31/19 balance sheet (
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