The Manda Panda Company uses the allowance method to account for bad debts. At t
ID: 2381601 • Letter: T
Question
The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2013, the allowance account had a credit balance of $78,800. Credit sales for 2013 totaled $2,950,000 and the year-end accounts receivable balance was $610,000. During this year, $77,000 in receivables were determined to be uncollectible. Manda Panda anticipates that 3% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31.
What is the bad debt expense that Manda Panda should report in its 2013 income statement?
Prepare the appropriate journal entry to record the contingency
What is the net realizable value (book value) Manda Panda should report in its 2013 balance sheet?
What is the bad debt expense that Manda Panda should report in its 2013 income statement?
3.Prepare the appropriate journal entry to record the contingency
What is the net realizable value (book value) Manda Panda should report in its 2013 balance sheet?
Explanation / Answer
2950000 x 3% =
Dr Bad Debt Expense 88500
Cr Allowance for Doubtful Accounts 88500
78800 - 77000 = 1800 Balance in the allowance account before adjustment
1800 + 88500 = 90300 Balance after adjustment
610000 - 90300 = 519700 net realizable value
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