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At the beginning of Year 3 Omega Company had a $52,000 balance in its accounts receivable account and a $1,400 balance in allowance for doubtful accounts. During Year 3 Omega experienced the following events. (1) Omega earned $220,000 of revenue on account. (2) Collected $230,000 cash from accounts receivable. (3) Wrote-off $1,000 of accounts receivable as uncollectible. Omega estimates uncollectible accounts to be 4% of receivables. Based on this information, the December 31, Year 3 balance in the accounts receivable account isa. $41,000.b. $40,000.c. $52,000.d. None of the answers is correct.

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mltn1980

Answer:

Based on this information, the December 31, Year 3

Balance in the accounts receivable account isa.

$41,000

Explanation:

  • Initial Balance  

Dr Accounts Receivable  $ 52,000

Cr Allowance for doubtful accounts $ 1,400

  • Omega earned $220,000 of revenue on account.  
  • When the company make credit sales, it means a Debit in the Accounts Receivable.

Dr Accounts Receivable  $ 220,000

Cr SALES $ 220,000

  • (2) Collected $230,000 cash from accounts receivable.
  • When the company collect those credit sales the company record a credit on the accounts receivable.  

Dr CASH $ 230,000

Cr Accounts Receivable  $ 230,000

  • (3) Wrote-off $1,000 of accounts receivable as uncollectible.  
  • If the company wrote off some customer accounts, it impacts in the Accounts receivable as credit because it has a negative impact in the credit sales of the company.

Dr Allowance for Uncollectible Accounts $ 1.000

Cr Accounts Receivable  $ 1.000

The final balance of those movements it's detailed as follows:

FINAL Balance  

Dr Accounts Receivable  $ 41.000

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