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Energy Company: estimated uncollectibles and balance sheet

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During its first year of operations, Energy Company had credit sales of $3,000,000; $600,000 remained uncollected at year-end. The credit manager estimates that $32,000 of these receivables will become uncollectible.

(a) Prepare the journal entry to record the estimated uncollectibles.

(b) Prepare the current assets section of the balance sheet for Energy Company. Assume that in addition to the receivables it has cash of $90,000, merchandise inventory of $130,000, and prepaid expenses of $7,500.

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Solution Summary

The solution estimates uncollectibles and balance sheets for an energy company. The solution prepares the current assets sections.

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(a)
I am assuming that we are using the allowance method here since the direct write-off method is considered inappropriate in most cases. To record the uncollectible, here are the journal entries

Debit: Bad Debt Expenses 32,000
Credit: Allowance for Doubtful ...

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