Mandalay Company requests that you record journal entries for its bad debt expen

Question

Mandalay Company requests that you record journal entries for its bad debt expense and uncollectible accounts receivable in 2017. Mandalay’s January 1, 2017, balances relevant to accounts receivable are as follows:

                                                                                    Dr                                 Cr

Accounts receivable                                              $400,000

Allowance for doubtful accounts                                                                  $20,000

During 2017:

• $45,000 of accounts receivable were uncollectible, and no more effort to collect these accounts will be made.

• Total sales were $1,200,000, of which $200,000 were cash sales.

• $900,000 was collected on account.

Required:

a. i) If Mandalay used the credit sales method to estimate bad debt expense and uses 4% of credit sales as its estimate of bad debts, provide the journal entries at December 31 to record writeoffs

and bad debts expense for 2017. [6 marks]

Explanation / Answer

Journal entry :

Date account and explanation debit credit Allowance for doubtful accounts 45000 Account receivable 45000 (To record write off) Bad debt expense (1000000*4%) 40000 Allowance for doubtful accounts 40000 (To record bad debt expense)

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