Reference no: EM133254291
(Accounts receivable and uncollectible accounts)
M&D Inc. began operations in January 2023. All of the company's sales are made on account. At the end of its first year of operations, the company's trial balance at December 31, 2023, showed a $50,000 outstanding balance in Accounts Receivable. During 2023, 75% of the total credit sales were collected, and no accounts were written off as uncollectible. After grouping its receivables based on credit risk characteristics and estimating the expected rate of credit losses for each group, management estimated that total expected credit losses would be $3,000. During the following year, 2024, M&D had credit sales totalling $250,000. It collected 80% of these sales, together with 95% of the outstanding receivables from 2023. During 2024, the accounts of seven customers, who owed a total of $3,800, were judged uncollectible and were written off. During the year, the company recovered $1,500 from customers whose accounts had previously been written off. (Note that this amount was not included in the collection figures given above.) After grouping its receivables based on credit risk characteristics and estimating the expected rate of credit losses for each group, the company estimated its total expected credit losses will be $3,200.
Required
A) Prepare the necessary journal entries for recording all of the preceding transactions in the accounting system of M&D Inc. for 2023 and 2024.
B) Show the accounts receivable section of the statement of financial position at December 31, 2024.
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