Kansas Furniture Mart had sales of $1,150,000 during 20X1, including $600,000 of
ID: 2554751 • Letter: K
Question
Kansas Furniture Mart had sales of $1,150,000 during 20X1, including $600,000 of sales on credit. Balances on December 31, 20X0, were Accounts Receivable, $120,000, and Allowance for Bad Debts, $10,000. For 20X1 collections of accounts receivable were $560,000. Bad debt expense was estimated at 2% of credit sales, as in previous years. Write-offs of bad debts during 20X1 were $9,000. 1. Prepare journal entries concerning the preceding information for 20X1 2. Show the ending balances of the balance sheet accounts on December 31, 20X1 3. Based on the given data, would you advise Eleanor Sarkowski, the president of the store, that the 2% estimated bad debt rate appears adequate?Explanation / Answer
Answer:-
Journal Entry
Particular
Debit($)
Credit($)
Accounts Receivables
600,000
To Sales
600,000
( Sales on Credit)
Cash
560,000
To Accounts Receivables
560,000
( 20*1 Collection of Accounts Receivables)
Allowance for bad debt
9,000
To Account Receivables
9,000
( Write offs bad debt expenses)
Bad debt Expenses
12,000
To Allowance for Bad debt
12,000
(Bad debt Expense was estimated 2%on Credit)(600,000*2%)
2. Show the ending balance of the balance sheet accounts on December 31 20*1
Accounts Receivables=120,000+600,000-560,000-9,000
Accounts Receivables=$151,000
Allowance for Bad debt =10,000-9,000+12,000=$13,000
Net Realizable Value of Account Receivables =$151,000-$13,000
Net Realizable Value of Account Receivables =$138,000
Based on the give data, would you advise Eleaner sarkows, the president of the store, that the 2%estimated baddebt rate appears adequate
It may be a little too much. The Allowance account rose by $2,000 and $2,000 less in Accounts Receivable were written off than the Bad Debt Expense that was charged.
Particular
Debit($)
Credit($)
Accounts Receivables
600,000
To Sales
600,000
( Sales on Credit)
Cash
560,000
To Accounts Receivables
560,000
( 20*1 Collection of Accounts Receivables)
Allowance for bad debt
9,000
To Account Receivables
9,000
( Write offs bad debt expenses)
Bad debt Expenses
12,000
To Allowance for Bad debt
12,000
(Bad debt Expense was estimated 2%on Credit)(600,000*2%)
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