91Ó°ÊÓ

(Journalize Various Accounts Receivable Transactions) The balance sheet of Starsky Company at December 31, 2016, includes the following.

Note receivable	\(36,000
Accounts receivable	182,100
Less: Allowance for doubtful accounts	17,300	\)200,800

Transactions in 2017 include the following.

1. Accounts receivable of \(138,000 were collected including accounts of \)60,000, on which 2% sales discounts were allowed.

2. \(5,300 was received in payment of an account which was written off the books as worthless in 2016.

3. Customer accounts of \)17,500 were written off during the year.

4. At year-end, Allowance for Doubtful Accounts was estimated to need a balance of $20,000. This estimate is based on an analysis of aged accounts receivable.

Instructions

Prepare all journal entries necessary to reflect the transactions above.

Step by step solution

01

Definition of Allowance Account

A type of reserve account created by the business entity from the profit for compensating the decrease in the value of assets is known as the allowance account.

02

Journal entries to reflect all the transactions

Date	Accounts and Explanation	Debit $	Credit $
1	Cash	$136,800
	Discount allowed	$1,200
	Accounts receivables		$138,000
2	Accounts receivables	$5,300
	Allowance for doubtful accounts		$5,300
	Cash	$5,300
	Accounts receivables		$5,300
3	Allowance for doubtful accounts	$17,500
	Accounts receivables		$17,500
4	Bad debt expenses	$14,900
	Allowance for doubtful accounts		$14,900

Working note:

Particular	Amount $
Reported allowance	$17,300
Add: Recovered	5,300
Less: Allowance made	(17,500)
Adjustment	$5,100

Particular	Amount $
Estimated balance	$20,000
Less: Adjustment	(5,100)
	$14,900

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