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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.

Respuesta :

hoangkhangpham94

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).

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