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At the beginning of Year 3 Omega Company had a $52,000 balance in its accounts receivable account...

Question:

At the beginning of Year 3 Omega Company had a $52,000 balance in its Accounts Receivable account and a $1,400 balance in Allowance for Doubtful Accounts.

During Year 3 Omega experienced the following events:

(1) Omega earned $220,000 of revenue on account.
(2) Collected $230,000 cash from accounts receivable.
(3) Wrote-off $1,000 of accounts receivable as uncollectible.

Omega estimates uncollectible accounts to be 4% of receivables.

Based on this information, the December 31, Year 3 balance in the accounts receivable account is:

a. $41,000.

b. $40,000.

c. $52,000.

d. None of the above.

Same information as above.

Omega estimates uncollectible accounts to be 4% of receivables.

The December 31, Year 3 unadjusted (current) balance in the allowance for doubtful accounts account (balance before expense recognition) is:

a. $400.

b. $2,040.

c. $2,400

d. $1,640

Same information as above.

Omega estimates uncollectible accounts to be 4% of receivables.

The December 31, Year 3 ending balance in the allowance for doubtful accounts account (balance after expense recognition) is:

a. $1,240.

b. $2,040.

c. $1,000.

d. $1,640.

Accounts Receivable:

Accounts receivable is a short term asset account which is presented under the current assets section of the Balance Sheet. This refers to the amount of collectibles from trade customers. This has a contra-asset account called "allowance for doubtful account" which is deducted against its ending balance.

Answer and Explanation:

The answer is a. $41,000

Accounts Receivable, beginning 52,000
Add: Revenue 220,000
Less: Cash collections (230,000)
Les: write-off of Receivables (1,000)
Accounts receivables, ending 41,000

The answer is a. $400

Allowance for doubtful accounts (ADA), beginning 1,400
Les: write-off of Receivables (1,000)
Unadjusted balance in ADA 400

The answer is d. $1,640.

Accounts receivable, ending 41,000
ADA rate 4%
ADA, ending 1,640

Learn more about this topic:

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Accounts Receivable: Definition, Process & Examples

from Accounting 101: Financial Accounting

Chapter 7 / Lesson 1
70K

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