[496290]

On December 31, of the current year, a company's unadjusted trial balance revealed the following: Accounts receivable of $185,600; Sales Revenue of $1,280,000; (75% were on credit), and Allowance for Doubtful Accounts of $1,600 (credit balance).

Assume that this company's bad debts are estimated and recorded as 1.5% of credit sales.
1. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet after adjustment.
2. Prepare the entry to write off a $1,500 account receivable on January 1 of the next year.
3. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear on the balance sheet immediately after writing off the account in part 2.

[SeanF138]

1. On the Balance Sheet it looks like this:
Accounts Receivable
Less: Allowance for Doubtful Accounts
Net Accounts Receivable

2. When you write off money the journal entry is:
Allowance for Doubtful Accounts(Debit)
Accounts Receivable(Credit)

3. You change the numbers for Accounts Receivable and Allowance for Doubtful Accounts according to the journal entry. Also your Net Accounts Receivable will not be changed since Accounts Receivable and Allowance for Doubtful Accounts are both decreasing at the same amount.


I hope this helps.