Q21E During August 2018, Lima Company... [FREE SOLUTION]

Chapter 8: Q21E (page 472)

During August 2018, Lima Company recorded the following:
鈥� Sales of $133,300 ($122,000 on account; $11,300 for cash). Ignore Cost of Goods Sold.
鈥� Collections on account, $106,400.
鈥� Write-offs of uncollectible receivables, $990.
鈥� Recovery of receivable previously written off, $800.
Requirement:
1. Journalize Lima鈥檚 transactions during August 2018, assuming Lima uses the direct write-off method.
2. Journalize Lima鈥檚 transactions during August 2018, assuming Lima uses the allowance method

Expert verified

(1) Journal entries under direct write-off method are recorded in Step 1.

(2) Journal entries under allowance method are recorded in Step 2.

Date	Account and explanation	Debit	Credit
August 2018	Accounts receivable	$ 122,000
	Sales Revenue		$ 122,000
	(Sold goods on account)

August 2018	Cash	$ 11,300
	Sales Revenue		$ 11,300
	(Sold goods on cash)

August 2018	Cash	$ 106,400
	Accounts receivable		$ 106,400
	(Collected cash on account.)

August 2018	Bad Debts	$ 990
	Accounts Receivable		$ 990
	(Recorded bad debts expense for the period.)

August 2018	Account Receivable	$800
	Bad Debts		$800
	(Reinstated previously written off account)

August 2018	Cash	$800
	Accounts receivable		$ 800
	(Collected cash on account.)

August 2018	Bad debts	$190
	Allowance for Bad debts		$190
	(Recorded bad debts expense for the period.)

Date	Account and explanation	Debit	Credit
August 2018	Accounts receivable	$ 122,000
	Sales Revenue		$ 122,000
	(Sold goods on account)

August 2018	Cash	$ 11,300
	Sales Revenue		$ 11,300
	(Sold goods on cash)

August 2018	Cash	$ 106,400
	Accounts receivable		$ 106,400
	(Collected cash on account.)

August 2018	Allowance for Bad Debts	$ 990
	Accounts Receivable		$ 990
	(Recorded bad debts expense for the period.)

August 2018	Account Receivable	$800
	Allowance for Bad Debts		$800
	(Reinstated previously written off account)

August 2018	Cash	$800
	Accounts receivable		$ 800
	(Collected cash on account.)

August 2018	Bad debts	$190
	Allowance for Bad debts		$190
	(Recorded bad debts expense for the period.)

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