Practice Quiz Accounts Receivable Part A: Prepare journal entries for the following transactions:

Practice Quiz

Accounts Receivable

Part A:

Prepare journal entries for the following transactions:

1. Wrote-off ABC Company account balance of $12,000

2. Received payment of $4,000 from XYZ Company and wrote-off the remaining balance of

$2,000

3. Sold merchandise to DEF Company for $20,000, 2/10, n/30. The cost of the merchandise

was $16,000

4. Collected $5,000 of the $12,000 previously owed from ABC Company

5. Received payment for one-half of amount owed from DEF Company within the discount

period

6. Received the remaining amount owed by XYZ Company of $2,000

7. Wrote off the balance of the DEF Company account as uncollectible

Part B:

Recorded the adjusting entry for Bad Debt Expense under the following independent scenarios

(assume net sales of $300,000 for the year and A/R balance of $50,000). Please also specify the

balance in the allowance account after adjustment:

A. The allowance account before adjustment has a credit balance of $3,000. Bad debt

expense is estimated at 2% of net sales.

B. The allowance account before adjustment has a credit balance of $3,000. An aging

analysis of A/R indicates uncollectible accounts of $7,500.

C. The allowance account before adjustment has a debit balance of $4,000. Bad debt

expense is estimated at 3% of net sales.

D. The allowance account before adjustment has a debit balance of $4,000. An aging

analysis of A/R indicates uncollectible accounts of $7,500.

Part C:

Please answer the following questions:

1. Under the Allowance method, what type of entry results in the recording of an expense?

2. What is the effect on the financial statements of a write-off of a customer A/R?

3. Explain how the matching principle applies to this chapter.

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