Situation 1: At the end of 2XXX, Winchester Company had a balance in accounts receivable of $43,500. After aging its receivables Winchester estimated that uncollectable approximated $5,050.
Requirements:
a. Assuming Winchester had a credit balance of $500 in its allowance for uncollectable account. Prepare the appropriate adjusting journal entry.
b. Assuming Winchester had a debit balance of $500 in its allowance for uncollectable account. Prepare the appropriate adjusting journal entry.
Situation 2:
During 2XXX, credit sales for Winchester were $200,000. Winchester estimates, based on past years' experience, that 2.5% of the credit sales will be uncollectible.
Requirements:
a) Assuming Winchester had a credit balance of $500 in its allowance for uncollectable account. Prepare the appropriate adjusting journal entry.
b) Assuming Winchester had a debit balance of $500 in its allowance for uncollectable account. Prepare the appropriate adjusting journal entry.
Situation 3:
Assuming during the year Winchester wrote off a $250 account. Prior to year-end the customer of this account paid Winchester the entire $250.
Requirements:
a) Prepare all the appropriate journal entries related to this situation assuming Winchester uses an allowance method.
b) Prepare all the appropriate journal entries related to this situation assuming Winchester uses the direct write-off method.