(Learning Objectives 4, 5: Account for accounts receivable and uncollectible receivables) On November 30, Palmer Party Planners had a $41,000 balance in Accounts Receivableand a $3,584 credit balance in Allowance for Uncollectible Accounts. During December, Palmermade credit sales of $200,000. December collections on account were $168,000, and write-offsof uncollectible receivables totaled $2,910. Uncollectible-account expense is estimated as 1% ofcredit sales. No sales returns are expected. Ignore cost of goods sold.Requirements1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible-accountexpense by the allowance method during December. Explanations are not required.2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts,and Net Accounts Receivable at December 31. How much does Palmer expect to collect?3. Show how Palmer Party Planners will report Accounts Receivable and net sales on itsDecember 31 balance sheet and income statement for the month ended December 31.
Bad Debts
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.
(Learning Objectives 4, 5: Account for
and a $3,584 credit balance in Allowance for Uncollectible Accounts. During December, Palmer
made credit sales of $200,000. December collections on account were $168,000, and write-offs
of uncollectible receivables totaled $2,910. Uncollectible-account expense is estimated as 1% of
credit sales. No sales returns are expected. Ignore cost of goods sold.
Requirements
1. Journalize sales, collections, write-offs of uncollectibles, and uncollectible-account
expense by the allowance method during December. Explanations are not required.
2. Show the ending balances in Accounts Receivable, Allowance for Uncollectible Accounts,
and Net Accounts Receivable at December 31. How much does Palmer expect to collect?
3. Show how Palmer Party Planners will report Accounts Receivable and net sales on its
December 31 balance sheet and income statement for the month ended December 31.
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