The ledger of Wainwright Company at the end of the current year shows Accounts R

Question

The ledger of Wainwright Company at the end of the current year shows Accounts Receivable $81,000; Credit Sales $991,000; and Sales Returns and Allowances $42,400. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) If Wainwright uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Wainwright determines that Hiller's $890 balance is uncollectible. If Allowance for Doubtful Accounts has a credit balance of $980 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 12% of accounts receivable. If Allowance for Doubtful Accounts has a debit balance of $560 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 9% of accounts receivable.

Explanation / Answer

Journal entries are shown as under:

S.No Date Particulars L.F Amount ($) Amount ($) (a) Dec-31 Bad debt expense 890    Allowance for doubtful accounts 890 (For hiller's account is written off) (b) Dec-31 Bad debt expense 8,740    Allowance for doubtful accounts 8,740 (For hiller's account is written off) $81,000*12%-980 (c ) Dec-31 Bad debt expense 7,850    Allowance for doubtful accounts 7,850 (For hiller's account is written off) $81,000*9%+560

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