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: .

Accounts receivable DR $400,000
Allowance for doubtful accounts CR $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.

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 December 31, 2017, Statement of Financial Position disclosure for net accounts receivable.

Explanation / Answer

Statement of Financial Position December 31, 2017 Current Assets: Accounts receivable 455000 Less: Allowance for doubtful accounts 15000 Net accounts receivable 440000 Calculations: Accounts receivable balance 455000 =400000-45000+1000000-900000 Bad debts expense 40000 =(1200000-200000)*4% Allowance for doubtful accounts balance 15000 =20000-45000+40000

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