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Chapter 2
Accounting for Receivables
AP-5B (
2
3
)
The Mayflower company uses the allowance method to account for uncollectible receivables.
During 2016, the company had total sales of $750,000, all on credit. The company uses the
income statement approach to estimate uncollectible receivables. Historically, the company
estimates that 1% of credit sales will be uncollectible. Mayflower Company has a December 31
year-end. Prepare the journal entry to record the uncollectible receivables on December 31,
2016.
Date
Account Title and Explanation
Debit
Credit
AP-6B (
2
3
)
Johnson Company uses the allowance method to account for uncollectible receivables.
During 2016 the company had total sales of $2,500,000. Of this total, $300,000 was cash sales.
On December 31, 2016 the company had an accounts receivable balance of $165,000 and a
credit balance in allowance for doubtful accounts of $7,000. Johnson Company has a
December 31 year-end.
Required
a) Assume the company uses the income statement approach to estimate uncollectible
receivables. Historically the company estimates 0.5% of credit sales will be uncollectible.
Prepare the journal entry to record bad debt expense on December 31, 2016.
Date
Account Title and Explanation
Debit
Credit
