Accounting for Uncollectible Receivables
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The trial balance of Marchant's Sporting House, Inc., shows a $150,000 outstanding balance in Accounts Receivable at the end of 2005. During 2006, 80% of the total credit sales of $3,500,000 was collected, and no receivables were written off as uncollectible. The company estimated that 2.0% of the credit sales would be uncollectible. During 2007, the account of Prior Sybrowsky, who owed $4,200, was judged to be uncollectible and was written off. At the end of 2007, the amount previously written off was collected in full from Mr. Sybrowsky.
Prepare the necessary journal entries for recording all the preceding transactions relating to uncollectibles on the books of Marchant's Sporting House, Inc.
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Solution Summary
This solution explains the entries for accounting uncollectible receivables under the percentage of sales method.
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We start with 2006
2006 Accounts Receivable 3,500,000
Sales 3,500,000
To record the total credit sales
Cash 2,800,000
...
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