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.
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?