The Rock has credit sales of $425,000 during 2013 and estimates at the end of 20

Question

The Rock has credit sales of $425,000 during 2013 and estimates at the end of 2013 that 1.5% of these credit sales will eventually default. Also, during 2013 a customer defaults on a $1,200 balance related to goods purchased in 2012.

Required:

1. Prepare the journal entry to record the defaulted balance.

2. Prepare the adjusting entry to record the bad debt expense for 2013.

The Rock has credit sales of $425,000 during 2013 and estimates at the end of 2013 that 1.5% of these credit sales will eventually default. Also, during 2013 a customer defaults on a $1,200 balance related to goods purchased in 2012. Prepare the journal entry to record the defaulted balance. Prepare the adjusting entry to record the bad debt expense for 2013.

Explanation / Answer

1) Journal entry to record defaulted balance.

Bad Debts Account Dr $1200

To Allowance for Bad and Doubtful debts Account $1200

  

Profit and Loss Account Dr   $1200

To Bad debts Account   $1200

2) adjusting entry to record the bad debt expense for 2013.

  

Allowance for Bad and Doubtful debts Account Dr $6375

To Accounts Receivable Account $6375

  

Bad Debts Account Dr $6375

To Allowance for Bad and Doubtful debts Account $6375

  

Profit and Loss Account Dr $6375

To Bad debts Account $6375

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