Question

Balance Sheet of AA & Co. showed the following information as at December 31, 2005.

Account Receivables 225,300
Allowance for Doubtful Accounts 6,759
Following transactions took place during the year ended December 31, 2006.
Credit sales 1,245,500
Cash Sales 230,600
Cash collected 1,386,200
Doubtful accounts written off 2,300
Company has a policy of providing for 3% of outstanding Receivables as Allowance for doubtful accounts.

Required:
(a) Prepare the following accounts for the year as they would appear in the books of AA & Co. (Journal entries are not required) :

i) Accounts Receivable Account.
ii) Allowance for Doubtful Accounts.

(b) Compute the amount of allowance for doubtful accounts required at the end of the year.

Answer 1

Answer on Question #62546 - Economics - Accounting

Balance Sheet of AA & Co. showed the following information as at December 31, 2005.

Account Receivables 225,300

Allowance for Doubtful Accounts 6,759

Following transactions took place during the year ended December 31, 2006.

Credit sales 1,245,500

Cash Sales 230,600

Cash collected 1,386,200

Doubtful accounts written off 2,300

Company has a policy of providing for 3% of outstanding Receivables as Allowance for doubtful accounts.

Required:

(a) Prepare the following accounts for the year as they would appear in the books of AA & Co. (Journal entries are not required):

i) Accounts Receivable Account.

ii) Allowance for Doubtful Accounts.

(b) Compute the amount of allowance for doubtful accounts required at the end of the year.

Solution

Receivable Account

Allowance for Doubtful Account

Allowance for doubtful accounts = Ending of Accounts Receivable x Percent of Accounts Receivable

$82,300 x 3% = $2,469

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