The ledger of Costello Company at the end of the current year shows Accounts Rec
ID: 2512273 • Letter: T
Question
The ledger of Costello Company at the end of the current year shows Accounts Receivable $149,000, Sales Revenue $857,000, and Sales Returns and Allowances $23,000.
Exercise 9-3 The ledger of Costello Company at the end of the current year shows Accounts Recelvable $149,000, Sales Revenue $857,000, and Sales Returns and Allowances $23,000. If Costello uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at Decernber 31, assuming Costello detenes that L. Dole's $1,900 balarice is uricollectible. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 LIST OF ACCOUNTS INK TO TEXT If Allowance for Doubtful Accounts has a credit balance of S2,800 In the trial balance, joumalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 3% of net sales, and (2) 10% of accounts receivable. (credit account titles are automatically idented when amount is entered. Do not indent manually.) No. Date (1) Dec.31 Account Titles and Explanation Deblt Credit (2) Dec. 31Explanation / Answer
9.3
A. Dec 31
Bad Debts A/c Dr $1,900
To Accounts Receivable A/c $1,900
B.
Net Sales = 857000 - 23000
= $834,000
3% of Net Sales = 834000 * 3%
= $25,020.
Accounts Receivable = $149,000
10% of Accounts Receivable = 149000 * 10%
= $14,900.
(1) Dec 31
Allowance for Doubtful Debts A/c Dr $2,800
Bad Debts A/c Dr $22,220
To Accounts Receivable A/c $25,020
(2) Dec 31
Allowance for Doubtful Debts A/c Dr $2,800
Bad Debts A/c Dr $12,100
To Accounts Receivable A/c $14,900
(OR)
(1) Increase Allowance for Doubtful Debts balance to meet the provision
Profit & Loss A/c Dr 22,220
To Allowance for Doubtful Debts A/c 22,220
Allowance for Doubtful Debts A/c Dr 25,020
To Accounts Receivable A/c 25,020
(2) Increase Allowance for Doubtful Debts balance to meet the provision
Profit & Loss A/c Dr 12,100
To Allowance for Doubtful Debts A/c 12,100
Allowance for Doubtful Debts A/c Dr 14,900
To Accounts Receivable A/c 14,900
C.
Net Sales = 857000 - 23000
= $834,000
2% of Net Sales = 834000 * 2%
= $16,680.
Accounts Receivable = $149,000
8% of Accounts Receivable = 149000 * 8%
= $11,920.
(1) Dec 31
Bad Debts A/c Dr $16,900
To Allowance for Doubtful Debts A/c $220
To Accounts Receivable A/c $16,680
(2) Dec 31
Bad Debts A/c Dr $12,140
To Allowance for Doubtful Debts A/c $220
To Accounts Receivable A/c $11,920
(OR)
(1) Increase Allowance for Doubtful Debts balance to meet the provision
Profit & Loss A/c Dr 16,900
To Allowance for Doubtful Debts A/c 16,900
Allowance for Doubtful Debts A/c Dr 16,900
To Accounts Receivable A/c 16,900
(2) Increase Allowance for Doubtful Debts balance to meet the provision
Profit & Loss A/c Dr 12,140
To Allowance for Doubtful Debts A/c 12,140
Allowance for Doubtful Debts A/c Dr 12,140
To Accounts Receivable A/c 12,140
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