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Prepare year-end adjusting entries

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Question - At 31 December 2018, Ester Ltd. reported gross accounts receivable of $3,501,800. Investigation showed the following:

a. The credit balance in the allowance for doubtful accounts was $280,400 after write-offs for the year but before any bad debt adjustment. Bad debt expense is based on a percentage of receivables. Based on the latest available facts, $320,000 will not be collected due to collection issues.

b. Terms of 2/10, n/30 were granted to all customers. Accounts receivable were recorded gross, and the discounts taken were recorded when taken by the customers in a discounts account, reported contra to the sales account. Estimated discounts inherent in the closing accounts receivable balance were $50,500. The allowance for sales discounts account was established at $35,800 last year and has not been adjusted since.

Required -

1. Prepare year-end adjusting entries with respect to accounts receivable.

2. Show how the net accounts receivable would appear on the statement of financial position on 31 December 2018.

Reference no: EM133025618

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