- Allowance method: Income statement and balance sheetapproaches. TempeCompany reported accounts receivable of $300,000 and an allowance foruncollectible accounts of $31,000 (credit) on the December 31, 19X2, balancesheet. The following data pertain to 19X3 activities and operations:
Sales on account
$2,000,000
Cash collections from credit customers
1,600,000
Sales discounts
50,000
Sales returns & allowances
100,000
Uncollectible accounts written off
29,000
Collections on accounts that were previously written off
2,700
Instructions
- Prepare journal entries torecord the sales- and receivables-related transactions from 19X3.
- Prepare the December 31,19X3, adjusting entry for uncollectible accounts assuming that uncollectiblesare estimated to be 2% of net credit sales.
- Prepare the December 31,19X3, adjusting entry for uncollectible accounts assuming that uncollectiblesare estimated at 1% of year-end accounts receivable.
- Compute the amount of theadjusting entry in part (c) assuming that $46,000, rather than $29,000, ofaccounts were written off in 19X3.