Homework:Chapter 5 - Apply Your Knowledge
On
June 30, Premier Party Planners had a $35,000
balance in Accounts Receivable and a $2,752 credit balance in Allowance for Uncollectible Accounts. During July,
Premier made credit sales of $193,000. July collections on account were
$164,000, and write-offs of uncollectible receivables totaled $2,870. Uncollectible-accounts expense is estimated as
3% of credit sales. No sales returns are expected. Ignore cost of goods sold.
Part 1
Requirement 1. Journalize sales, collections, write-offs of uncollectible, and uncollectible-account expense by the
allowance method during July. Explanations are not required. (Record debits first, then credits. Exclude
explanations from any journal entries.)
(a) Begin by recording the journal entry for July sales.
Journal Entry
Date Accounts Debit Credit
(a) Accounts Receivable 193,000
Sales Revenue 193,000
Part 2
(b) Next, journalize the collections on account.
Journal Entry
Date Accounts Debit Credit
(b) Cash 164,000
Accounts Receivable 164,000
Part 3
(c) Now journalize the write-offs of uncollectibles.
Journal Entry
Date Accounts Debit Credit
(c) Allowance for Uncollectible Accounts 2,870
Accounts Receivable 2,870
Part 4
(d) Finally, record the entry to journalize the uncollectible-account expense.
Journal Entry
Date Accounts Debit Credit
(d) Uncollectible-Account Expense 5,790
Allowance for Uncollectible Accounts 5,790
Part 5
Requirement 2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts, and Net
Accounts Receivable at July 31. How much does Premier expect to collect?
In the following T-accounts, enter the beginning balances, the adjusting entries and compute the ending balances.
(Enter the corresponding letter as the posting reference.)
Accounts Receivable Allowance for Uncollectible Accounts
Beg Bal 35,000 (b) 164,000 Beg Bal 2,752
(a) 193,000 (c) 2,870 (c) 2,870 (d) 5,790
Bal 61,130 Bal 5,672
Part 6
Compute the net accounts receivable at July 31.
The net accounts receivable at July 31 is $55,458
Part 7
Premier expects to collect $55,458
Part 8
Requirement 3. Show how Premier Party Planners will report accounts receivable and net sales on its July 31
balance sheet and income statement for the month ended July 31.Begin by preparing the partial balance sheet
showing how the store will report accounts receivable on July 31.
Balance Sheet (Partial):
Accounts receivable $61,130
Less: Allowance for uncollectible accounts (5,672)
Accounts receivable, net $55,458
Part 9
Now, prepare the partial income statement showing the net sales on July 31.
Income Statement (Partial):
Net sales $193,000
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