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Chapter 2
Accounting for Receivables
AP-9B (
2
3
)
In 2016, Upper Machine Sales Company sold equipment on credit in the amount of $950,000.
Total cash collections during the year were $820,000. The company determined that $7,000
of accounts receivable would not be collected and wrote them off. At the end of 2016,
management decided to increase its allowance percentage to 1% of credit sales from 0.5%
last year because of the amount of accounts receivable that proved to be uncollectible during
the year. At the end of 2015, the company had $135,000 in accounts receivable and a credit
balance of $6,000 in allowance for doubtful accounts. Assume the company has a year-end of
December 31.
Required
a) Prepare the necessary journal entries to record all 2016 transactions including sales,
collection, the write-off and the new allowance amount. Disregard the dates when
recording the transactions.
Date
Account Title and Explanation
Debit
Credit
b) Show the amount of net accounts receivable on the balance sheet as at December 31, 2016.
