During Burns Company's first year of operations, credit sales totaled $156,000 and collections on credit sales totaled $113,000. Burns estimates that bad debt losses will be 1.0% of credit sales. By year-end, Burns had written off $380 of specific accounts as uncollectible. Required: 1. Prepare all appropriate journal entries relative to uncollectible accounts and bad debt expense. 2. Show the year-end balance sheet presentation for accounts receivable.

(1)A journal was prepared for Burns company for their first year operations. (2)The end of year balance sheet for account receivable was also prepared which had a net account receivable of $41,440.

Explanation:

Solution

(1) The first step is to prepare a Journal entries relative to uncollectable accounts and bad debts expense which is stated as follows:

Bad debt                                           Credit sales * percentage

The bad debt amount                      $156,000  1.0%

Total                                                                 $1560

The estimated bad deb loss becomes:

                                                                          Debit          Credit

The debt expense account (dr)                        $1560

Allowance for uncollectable of accounts                        $1560

For writing off a 380 to a particular uncollectible accounts :

                                                                              Debit        Credit

Allowance for uncollectable of accounts           $380

To the account receivable                                                     $380

(2) The year end - balance  accounts receivable is shown below:

The year end balance sheet presentation:

The account receivable= $156,000 - $113,000 = $43,000

The account receivable for the uncollactable  amount = $43,000 - $380 = $42,620

The less amount for uncollactable sum or amount = $1560 - $380 = $1,180

The net account receivable = $42,620 -$1180 = $41,440

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