[sagittarian]

In its December 31, Year 1, balance sheet, Fleet Co. reported accounts receivable of $100,000 before allowance for uncollectible accounts of $10,000. Credit sales during Year 2 were $611,000, and collections from customers, excluding recoveries, totaled $591,000. During Year 2, accounts receivable of $45,000 were written off and $17,000 were recovered. Fleet estimated that $15,000 of the accounts receivable at December 31, Year 2, were uncollectible. In its December 31, Year 2, balance sheet, what amount should Fleet report as accounts receivable before allowance for uncollectible accounts?

a.

$58,000

b.

$82,000

c.

$75,000

d.

$67,000

Could someone explain the answer to this question?

Thanks!

[marqzho]

The question asked for AR ending balance

AR beginning balance : 100

credit sale:
Dr. AR 611<-
Cr. Sale 611

payment from customer:
Dr. Cash 591
Cr. AR 591<-

AR written off:
Dr. Allowance for doubtful debt 45
Cr. AR 45<-

So you have +100+611-591-45=75

recover bad debt is irrelevant
Dr. cash 17
Cr. Allowance 17

Bad Debt estimate is irrelevant
Dr. bad debt expense 15
cr. allowance 15

beg balance of allowance is irrelevant

REG 90
FAR 95
AUD 98
BEC 84

[marqzho]

—

REG 90
FAR 95
AUD 98
BEC 84

[sagittarian]

Thank you, Marqzho!

Could you please explain why the recovered bad debts (17K) is irrelevant?

[marqzho]

Bad debt recovery J/E

Dr. Cash 17
Cr. Allowance 17

It won't affect accounts receivable before allowance for uncollectible accounts

REG 90
FAR 95
AUD 98
BEC 84

[michaela.xu]

Hey marqzho, bumping up this really aged post, but i don't think your journal entry for bad debt recovery is correct.

The JE really should be two steps:
1) reverse the write-off JE
Debit A/R
Credit Allowance for doubtful accounts
2) If there is cash payments:
Debit Cash
Credit A/R
Since in the question, there is no cash payment, Step 2) is not relevant. However, step 1) definitely is and touches on Allowance and A/R account.

Therefore, I think the $17K recovery is relevant for A/R balance at year end.

[michaela.xu]

Hey marqzho, bumping up this really aged post, but i don't think your journal entry for bad debt recovery is correct.

The JE really should be two steps:
1) reverse the write-off JE
Debit A/R
Credit Allowance for doubtful accounts
2) If there is cash payments:
Debit Cash
Credit A/R
Since in the question, there is no cash payment, Step 2) is not relevant. However, step 1) definitely is and touches on Allowance and A/R account.

Therefore, I think the $17K recovery is relevant for A/R balance at year end.

[Author]

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