At the beginning of the year the Slate Gravel Company has a $460.00 debit balanc

Question

At the beginning of the year the Slate Gravel Company has a $460.00 debit balance in their allowance for doubtful accounts account. During the year they had $415,000 in net credit sales.  

a) Assuming the company uses the percentage of credit sales approach, record the adjusting journal entry to estimate this years bad debt expense:

[Assume bad debts 1.5% of net credit sales].

b) Using the following information from an aging schedule which was prepared:                                           

                                        Estimated

                              Total   Percentage

          Age              Balance                  Uncollectible

0-30  days               $50,000                            1%

31-60 days   10,000                             2%

61-120 days   4,000                              5%               

121-180 days    1,000                      30%

over 180 days   2,000                      50%

Assuming the firm uses the aging of receivables method, Record the adjusting journal entry to estimate this years bad debt expense:

c) If we determine Joe Nopay's account receivable of $300 is un-collectible, give the entry to record how his account will be written off.

Explanation / Answer

a Bad debt expense 6225 =415000*1.5%           Allowance for doubtful account 6225 b Allowance for doubtful account required = (50000*1%)+(10000*2%)+(4000*5%)+(1000*30%)+(2000*50%)= $2200 Bad debt expense 2660 =2200+460           Allowance for doubtful account 2660 c Allowance for doubtful account 300          Accounts receivable-Joe Nopay 300

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