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Accounts Receivable - uncollected accounts

See attached file for full problem description.

PART II — ACCOUNTS RECEIVABLE
A. ACCOUNTS RECEIVABLE—UNCOLLECTIBLE ACCOUNTS

Instructions: Present the journal entries specified below; show supporting calculations.

The trial balance of Friendly Company at December 31, 2003 includes the following:
Debits Credits
Accounts Receivable 100,000
Allowance for Doubtful Accounts 500
Sales (all on credit) 600,000
Sales Returns and Allowances 60,000

(1) If Friendly uses the aging method and estimates that $5,000 of receivables will be uncollectible, prepare the December 31, 2003 adjusting entry.

(2) If Friendly estimates uncollectibles at 1% of net credit sales, prepare the appropriate adjusting entry for December 31, 2003.

(3) Assume that on February 10, 2004 the specific account of Mark Shaw with a balance of $600, is deemed uncollectible. Record the write-off.

(4) Assume that on May 12, 2004 Shaw pays one-half of the above balance in full and is expected to pay the remainder within 30 days. Record the appropriate entries.

B. SALE OF ACCOUNTS RECEIVABLE

Instructions: Present the journal entries specified below.

(1) On June 30, 2004 Stone Company sells $600,000 of accounts receivable to National Factors Inc. for cash less a 2.5% service charge. Record the sale.

(2) On July 31, 2004 American Express remits cash to Stone Company in settlement of credit card billings of $2,000 less a 2.5% service fee. Record the settlement on the books of Stone Company.

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Solution Summary

The solution goes over uncollected accounts and records the settlements in accounting entries.

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