10 Nov The trial balance of M&D Inc. shows a $50,000 outs
The trial balance of M&D Inc. shows a $50,000 outstanding balance in Accounts Receivable at the end of the first year of operations, December 31, 2015. During the fiscal year, 75% of the total credit sales were collected and no accounts were written off as uncollectible. The company estimated that 1.5% of the credit sales would be uncollectible. During the following year, 2016, M&D had sales, all on account, totaling $250,000. It collected 80% of these sales, together with 95% of the outstanding receivables from 2015. During 2016, the accounts of seven customers who owed a total of $3,800, were judged uncollectible and were written off. During the year, the company recovered $1,500 from customers whose accounts had previously been written off (note that this amount was not included in the collection figures given above). The company estimated its bad debt expense to be 1% of its credit sales. Required: a. Prepare the necessary journal entries for recording all the preceding transactions in the accounting system of M&D Inc. for 2015 and 2016. b. Show the accounts receivable section of the statement of financial position at December 31, 2016.
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