Reference no: EM132595890

Credit department of the Starlight Inc. estimates uncollectible accounts while analyzing various receivables. By the end of year 2017, credit manager collects following information relating to receivables and uncollectible accounts.

Gross accounts receivable at the end of year as presented in balance sheet of company $520000. On the basis of past experience, company estimates that 2.5 percent of gross accounts receivable are uncollectible. During 2017, an amount of $1500 receivable from specific customer is expected to be written off as uncollectible. However, of these accounts written off, total receivables of $500 were subsequently collected.

Required:

Question a. Make all necessary journal entries and calculate amount of accounts receivable in the balance sheet of Starlight Inc. before and after write-off of uncollectible accounts as at December 31, 2017.

Question b. Further, Company comes to know that a customer whose receivables were due on December 1, 2017, could not pay due amount of $50000. Instead, the customer issues 3-months notes receivable along with 6 percent interest. Company records interest revenue receivable at December 31, 2017. However, the customer paid full amount along with interest on February 28, 2018 (after three months).