Journalize the following transactions in the accounts of Zippy Interiors Company, a restaurant supply company that uses the allowance method of accounting for uncollectible receivables:

May 24 Sold merchandise on account to Old Town Cafe $18,450. The cost of goods sold was $11,000.
Sept. 30 Received $6,000 from Old Town Cafe and wrote off the remainder owed on the sale of May 24 as uncollectible.
Dec. 7 Reinstated the account of Old Town Cafe that had been written off on September 30 and received $12,450 cash in full payment.

Question

03-04-2020
Business

contestada

Journalize the following transactions in the accounts of Zippy Interiors Company, a restaurant supply company that uses the allowance method of accounting for uncollectible receivables:

May 24 Sold merchandise on account to Old Town Cafe $18,450. The cost of goods sold was $11,000.
Sept. 30 Received $6,000 from Old Town Cafe and wrote off the remainder owed on the sale of May 24 as uncollectible.
Dec. 7 Reinstated the account of Old Town Cafe that had been written off on September 30 and received $12,450 cash in full payment.

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hoangkhangpham94 hoangkhangpham94 · Answer 1 · 2020-04-05T04:41:47+02:00

Answer:

The entries will be:

May 24

Dr Cost of good sold 11,000

Cr Inventory 11,000

(to record cost of good sold)

Dr Account Receivable 18,450

Cr Sales revenue 18,450

(to record revenue on account)

Sept 30

Dr Cash 6,000

Dr Allowance for doubtful debt 12,450

Cr Account Receivable 18,450

(to record partial collection from Old Town cafe and written-off of the remaining)

Dec 7

Dr Account Receivable 12,450

Cr Allowance for Doubtful debt 12,450

(to re-instated account receivable from Old Town cafe)

Dr Cash 12,450

Cr Account Receivable 12,450

(to record full collection from Old Town cafe)

Explanation:

May 24:

+ Cost of good sold is $11,000 so it is recorded as Increase in COGS (Dr) and decrease in inventory delivered (Cr);

+ Account receivable increase (Dr) and Sales revenue increases (Cr) following the sales on account.

Sept 30:

As the company apply the allowance method of accounting for uncollectible receivables, the written off of Receivable (Cr) will include the written off of Allowance for doubtful debt (Dr).

Dec 7:

The reinstated of account receivable will include the reverse written off entries ( Dr Account Receivable Cr Allowance for doubtful debt) before the collection entry is made ( Dr Cash Cr Account Receivable).