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InClassEx_ReceivablesPOS2.docxMBA 520 | Baker
In Class Exercise | Percent-of-Sales
Accounting for uncollectible accounts using the allowance method (percent-of-sales) and reporting receivables on the balance sheet
At January 1, 2015, Windy Mountain Flagpoles had Accounts Receivable of $ 34,000 and Allowance for Bad Debts had a credit balance of $ 3,000. During the year, Windy Mountain Flagpoles recorded the following:
a. Sales of $189,000 ($165,000 on account; $ 24,000 for cash).
b. Collections on account, $ 133,000.
c. Write-offs of uncollectible receivables, $ 2,800.
Requirements
1. Journalize Windy’s transactions that occurred during 2015. The company uses the allowance method.
2. Post Windy’s transactions to the Accounts Receivable and Allowance for Bad Debts T-accounts.
3. Journalize Windy’s adjustment to record bad debts expense assuming Windy estimates bad debts as 1% of credit sales. Post the adjustment to the appropriate T- accounts.
4. Show how Windy Mountain Flagpoles will report net accounts receivable on its December 31, 2015 balance sheet.
Requirement 1
a. Sales of $189,000 ($165,000 on account; $24,000 for cash).
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Date |
Account |
Debit |
Credit |
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Record sales for the year |
b. Collections on account, $133,000.
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Date |
Account |
Debit |
Credit |
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Collected cash on account |
c. Write-offs of uncollectible receivables, $2,800.
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Date |
Account |
Debit |
Credit |
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Wrote off uncollectible accounts |
Requirement 2
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Accounts Receivable |
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Allowance for Bad Debts |
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Requirement 3
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Date |
Account |
Debit |
Credit |
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Recorded bad debts expense for the period |
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Allowance for Bad Debts |
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Bad Debts Expense |
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Requirement 4
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WINDY MOUNTAIN FLAGPOLES |
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Balance Sheet—Partial |
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December 31, 2015 |
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Assets |
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Current Assets |
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Accounts Receivable |
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Less: Allowance for Bad Debts |
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