Reference no: EM132964260

The accounts of Company Ltd. provide the following 20X0 information at December 31, 20X0:

Accounts receivable $2,000,000 DR

Allowance for sales discounts $20,000 CR

Allowance for doubtful accounts $130,000 CR

Total credit sales revenue during 20X0 $20,000,000

Investigation showed the following:

a) Examination of an aging of accounts receivable showed that accounts of $100,000 previously provided for (i.e., previously recorded in the allowance for doubtful accounts account) should be written off. Of the remaining balance, $200,000 was doubtful at year-end.

b) Estimated sales discounts inherent in the closing accounts receivable balance were $15,000. Terms of 1/10, n/45 were granted to 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.

Problem 1. Prepare year-end adjusting entries with respect to accounts receivable and the related allowances.

Problem 2. Show how the net accounts receivable appear on the statement of financial position on December 31, 20X0.