Account for receivables

Question

The December 21, 2021, ledger of accounts receivable has a balance of 24,000,000. On this date, the company estimates 1,200,000 to be uncollectible , whereas 2,000,000 have to be written off.

Required:

1. Carry out any necessary journal entries.

2. Present the accounts receivable extract as it has to appear in the statement of financial position of December 31,2021.

Answer 1

Hi Hudson,

I believe the answer to your question would be:

#1 Journal Entry to record as of December 21st, 2021:

1. To record the estimated uncollectible accounts receivable:

Dr. Bad debt expense - 1,200,000

Cr. Allowance for Doubtful accounts - (1,200,000)*

*this would net against the Accounts receivable

1. To write off Accounts receivable:

Dr. Allowance for doubtful accounts - 2,000,000

Cr. Accounts receivable - (2,000,000)

#2 The accounts receivable would be 22,800,000, net of allowance for doubtful accounts of 1,200,000, as of December 31,2021 (so to show as gross basis, accounts receivable balance of 24,000,000 and allowance for doubtful account of 1,200,000). I made the assumption that the beginning balance of accounts receivable was 26,000,000 with allowance for doubtful account of 2,000,000 (that was written off via my answer to your question to #1 above) netting to 24,000,000 as shown in your question.

Hope this helps!