Ricardo Company’s balance sheet reported the following information as of January 1, 1998.
Accounts Receivable 75,800
Less: Allowance for Doubtful Accounts (6,500)
Net Realizable Value 69,300
The following transaction took place during January 1998:
Jan 3: Sold 40,000 of merchandise, plus 7% GST and 8% PST, on account
Jan 9: Wrote-off an uncollectible amount 500
Jan 15: Received a 5000, 90 day, 10% note, in settlement of an account balance
Jan 18: Collected 36,000 from credit customers
Jan 21: Sold 18,000 of merchandise, plus 7% GST, no PST, on account
Jan 30: Received 2,000 from an account that had been written-off as uncollectible last year.
Required:
1. Prepare journal entries for the January transactions?
2. Prepare the adjusting entry on January 31 to adjust the allowance account, assuming that uncollectible accounts are estimated at 2% of credit sales. [Income statement approach]?
3. Prepare the adjusting entry on January 31 to adjust the Allowance account, assuming that uncollectible accounts are estimated at 3% of total outstanding receivables [simplified balance sheet]?
4. Prepare the Accounts Receivable section of the balance sheet at January 31, 1998, assuming the simplified balance sheet approach?