During Year 2, Oklahoma Trucking Co. had service revenue on account of $350,000. Oklahoma had a beginning balance in Accounts Receivable of $35,000 and an ending balance of $42,500. During the year Oklahoma wrote-off $8,750 of receivables. Oklahoma uses the direct write-off method.a) Prepare the journal entry to record Oklahoma's revenue for Year 2.b) Prepare the journal entry to record the write-off of the receivables during Year 2.c) Determine the amount of cash that Oklahoma collected from customers during Year 1.
What will be an ideal response?
c) $333,750
a) The revenue earned on account is recorded as a debit to accounts receivable and a credit to service revenue.
b) Using the direct write-off method, the write-off is recorded as a debit to uncollectible accounts expense and a credit to accounts receivable.
c) Ending accounts receivable of $42,500 = Beginning accounts receivable of $35,000 + Revenue on account of $350,000 ? Collections (the unknown) ? $8,750 write-offs
Collections = $35,000 + $350,000 ? $8,750 ? $42,500 = $333,750
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