1.
To record: The transactions of Company U for each date.
1.
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is reported in the
Date | Account Title and Explanation | Debit ($) | Credit ($) | |
June 12 ,2015 | Accounts receivable | 41,000 | ||
Service revenue | 41,000 | |||
(To record the service provided on account) | ||||
September 17, 2015 | Cash | 25,000 | ||
Accounts receivable | 25,000 | |||
(To record the receipt of cash on account) | ||||
December 31, 2015 | Bad debt expense (2) | 7,200 | ||
Allowance for uncollectible accounts | 7,200 | |||
(To record the estimation of future | ||||
March 4, 2016 | Accounts receivable | 56,000 | ||
Service Revenue | 56,000 | |||
(To record the services provided on account ) | ||||
May 20, 2016 | Cash | 10,000 | ||
Accounts receivable | 10,000 | |||
(To record receipt of cash on account) | ||||
July 2, 2016 | Allowance for uncollectible accounts | 6,000 | ||
Accounts receivable | 6,000 | |||
(To record the writing-off of actual bad debts) | ||||
October 19, 2016 | Cash | 45,000 | ||
Accounts receivable | 45,000 | |||
(To record the receipt of cash from customer on account) | ||||
December 31, 2016 | Bad debt expense (5) | 3,750 | ||
Allowance for uncollectible accounts | 3,750 | |||
(To record the estimation of future bad debts) |
Table (1)
Working notes:
Calculate Estimate future bad debts On December 31, 2015:
Calculate Estimate future bad debts On December 31, 2016:
2.
To
2.
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.
For 2015:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
September 17, 2015 | Accounts receivable | $25,000 | |||
December 31, 2015 | Balance (Balancing figure) | $25000 |
Table (2)
For 2016:
Cash account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
January 1, 2016 | Beginning balance | $25,000 | |||
May 20, 2016 | Accounts receivable | $10,000 | |||
October 19, 2016 | Accounts receivable | $45,000 | |||
December 31, 2016 | Balance (balancing figure) | $80,000 |
Table (3)
For 2015:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
June 12, 2015 | Service revenue | $41,000 | September 17, 2015 | Cash | $25000 |
December 31, 2015 | Balance (Balancing figure) | $16,000 |
Table (4)
For 2016:
Accounts receivable account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
March 4, 2016 | Service revenue | $56,000 | May 20, 2016 | Cash | $10,000 |
July 2, 2016 | Allowance for uncollectible accounts | $6,000 | |||
October 19, 2016 | Cash | 45,000 | |||
December 31, 2016 | Balance (balancing figure) | $11,000 |
Table (5)
For 2015:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
December 31, 2015 | Bad debt expense | $7,200 |
Table (6)
For 2016:
Allowance for uncollectible account | |||||
Date | Particulars | Debit | Date | Particulars | Credit |
July 2, 2016 | Accounts receivable | $6,000 | December 31, 2016 | Bad debt expense | $3,750 |
December 31, 2016 | Balance (balancing figure) | $4,950 |
Table (7)
3.
To Calculate: The net realizable value of accounts receivable at the end of 2015 and 2016.
3.
Explanation of Solution
Accounts receivable:
Accounts receivable is an asset of the firm, which refers to the amount which the company would receive in near future for the goods or services provided; hence it is shown in the balance sheet.
Calculate the net realizable value of accounts receivable at the end of 2015 and 2016:
Years | 2015 | 2016 |
Total accounts receivable | $16,000 | $11,000 |
Less: Allowance for uncollectible accounts | ($7,200) | ($4,950) |
Net realizable value | $8,800 | $6,050 |
Table (8)
Hence, the net realizable value of Company U for the year 2015 is $8,800 and for the year 2016 is $6,050.
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