Record transactions related to accounts receivable (LO5-3, 5-4, 5-5).The following information applies to the questions. The following events occur for The Underwood Corporation during 2021 and 2022, its first two years of operations. June 12, 2021 Provide services to customers on account for $41,000. September 17, 2021 Receive $25,000 from customers on account. December 31, 2021 Estimate that 45% of accounts receivable at the end of the year will not be received. March 4, 2022 Provide services to customers on account for $56,000. May 20, 2022 Receive $10,000 from customers for services provided in 2021. July 2, 2022 Write off the remaining amounts owed from services provided in 2021. October 19, 2022 Receive $45,000 from customers for services provided in 2022. December 31, 2022 Estimate that 45% of accounts receivable at the end of the year will not be received. Calculate the net realizable value of accounts receivable at th endof 2018 and 2019. 2018 2019Total accounts receivable Less: Allowance for uncollectible accounts Net realizable value

The Underwood Corporation

Journal Entries

June 12, 2021:

Debit Accounts Receivable $41,000

Credit Service Revenue $41,000

To record provision of services to customers on account

Sept 17, 2021:

Debit Cash Account $25,000

Credit Accounts Receivable $25,000

To record cash receipt from customers

Dec. 31, 2021:

Debit Uncollectible Expense $7,200

Credit Allowance for Doubtful Accounts $7,200

To record allowance for doubtful accounts.

March 4, 2022:

Debit Accounts Receivable $56,000

Credit Service Revenue $56,000

To record provision of services to customers on account.

May 20, 2022:

Debit Cash Account $10,000

Credit Accounts Receivable $10,000

To record cash receipts from customers.

July 2, 2022:

Debit Allowance for Doubtful Accounts $6,000

Credit Accounts Receivable $6,000

To record write-off of uncollectibles.

Oct. 19, 2022:

Debit Cash Account $45,000

Credit Accounts Receivable $45,000

To record cash receipts from customers.

Dec. 31, 2022:

Debit Uncollectible Expense $3,750

Credit Allowance for Doubtful Accounts $3,750

To bring the allowance for doubtful accounts to $4,950

b) Calculation of Net Realizable Value of Accounts Receivable:

                                                                          2021          2022

Accounts Receivable                                      $16,000     $11,000

Less: Allowance for Uncollectible Accounts  $7,200      $4,950

Net Realizable Value                                      $8,800       $6,050

Explanation:

a) Services provided to customers on account increase the accounts receivable and the Service Revenue accounts by the same amount.

b) Cash Receipts from customers on account decrease the accounts receivable and increase the Cash Account by the same amount.

c) Allowance for Uncollectible (Doubtful) is a provision made to cover the risk of credit sales.  The account is a contra account to the Accounts Receivable and is increased or reduced accordingly depending on the estimated allowance.  Write-off of debts deemed uncollectible is done in this account.

d) The net realizable value of accounts receivable is the balance of accounts receivable less the allowance for uncollectible at the end of the period.

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