At December 31,2018,Pinebrook Inc

question 25

Essay

At December 31,2018,Pinebrook Inc.reported $135,000 in accounts receivable and $9,300 in the allowance for doubtful accounts.In 2019,the company had $875,000 in credit sales and collected $915,000 on accounts receivable.Pinebrook also wrote off $2,500 in uncollectable accounts.The company uses the aging method to estimate bad debts,and management has estimated that the allowance for doubtful accounts for December 31,2019 should be $8,800.
Required:
a.Provide the journal entry to record bad debts expense for the year 2019.(Ignore information contained in part (b)below. )
b.While auditing the books of Pinebrook,you discover that the company's bookkeeper has erroneously recorded a transaction: for one customer who went bankrupt in 2019,she wrote off the $6,800 receivable with a debit to bad debts expense.Determine the error's effects (overstated/understated)on the December 31,2019 balance sheet (accounts receivable,allowance for doubtful accounts)and the income statement for the year 2019.
c.In January 2020,the company factored all of its receivables ($95,000)without recourse for proceeds of $77,000.Present the journal entry to record this transaction.

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Definitions:

Government Relations

The strategic management of interactions and relationships between an organization and government agencies, officials, and policymakers.

Lobbying

The process of trying to affect the choices of government officials, frequently undertaken by lobbyists or special interest organizations.

Pink Slime

A derogatory term for processed beef products that are treated and used as food filler.

USDA

Stands for the United States Department of Agriculture, a federal agency responsible for developing and executing federal laws related to farming, forestry, rural economic development, and food.