At December 31, 2021, Crane Imports reported this information on its balance sheet. Accounts receivable $637,000 Less: Allowance for doubtful accounts 35,000 During 2022, the company had the following transactions related to receivables. 1. Sales on account $3,060,000 2. Sales returns and allowances 50,000 3. Collections of accounts receivable 2,760,000 4. Write-offs of accounts receivable deemed uncollectible 42,000 5. Recovery of bad debts previously written off as uncollectible 15,000 (a) Prepare the journal entries to record each of these five transactions

Question

12-02-2021
Business

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At December 31, 2021, Crane Imports reported this information on its balance sheet. Accounts receivable $637,000 Less: Allowance for doubtful accounts 35,000 During 2022, the company had the following transactions related to receivables. 1. Sales on account $3,060,000 2. Sales returns and allowances 50,000 3. Collections of accounts receivable 2,760,000 4. Write-offs of accounts receivable deemed uncollectible 42,000 5. Recovery of bad debts previously written off as uncollectible 15,000 (a) Prepare the journal entries to record each of these five transactions

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Answer:

Crane Imports

Journal Entries:

1. Debit Accounts Receivable $3,060,000

Credit Sales Revenue $3,060,000

To record the sales on account.

2. Debit Sales Returns and Allowances $50,000

Credit Accounts Receivable $50,000

To record sales returns and allowances.

3. Debit Cash $2,760,000

Credit Accounts Receivable $2,760,000

To record cash collections from customers.

4. Debit Uncollectible Expenses $42,000

Credit Allowance for Doubtful Accounts $42,000

To record uncollectible accounts.

5. Debit Accounts Receivable $15,000

Credit Uncollectible Expenses $15,000

To reinstate a previously written bad debt.

Debit Cash $15,000

Credit Accounts Receivable $15,000

To record the receipt of cash on account.

Explanation:

a) Data and Calculations:

Accounts receivable $637,000

Less: Allowance for doubtful accounts 35,000

Balance = $602,000

b) Journal entries are used to initially record business transactions as they occur on a daily basis. They identify the accounts to be debited and credited. They form the basis for the postings to the general ledger where accounts are summarized according to their account titles.