Question

Accounts receivable, bad debts, credit sales, and cash collections analysis At the beginning of the year, accounts receivable were $144,000 and the allowance for bad debts was $11,500. During the year, sales (all on account) were $600,000, cash collections were $580,0000, bad debts expense totaled $14,200, and $12,000 of accounts receivable were written off as bad debts.Calculate the balances at the end of the year for the Accounts Receivable and Allowance for Bad Debts accounts. (Hint: Use T-accounts to analyze each of these accounts, plug in the amounts that you know, and solve for the ending balances.)

Answer 1

Answer:

Ending Balance of Accounts Receivables is                         $152,000

Ending Balance of Allowance for Bad Debts Account             $13,700

Explanation:

The question says to calculate the balances at the end of the year. For Accounts Receivable and the Allowance for the Bad Debts Accounts

First, the Accounts Receivables Ending Balance                $

= The Beginning Balance of Accounts Receivable             144,000

Add Sales on Account                                                           600,000

Less Cash Collections                                                           (580,000)

Write offs                                                                                   (12,000)

Ending Balance of Accounts Receivables is                         $152,000

Secondly, the ending balance for Allowance for Bad Debts account

= The beginning Balance of Allowance                                      $11,500              

less: The written off value                                                             (12,000)

Add: The Bad debt expense                                                         $14,200

Ending Balance of Allowance for Bad Debts Account             $13,700