Done Problem 1: Allowance 3 (20 p lohnson Company uses the allowance me hod for

Question

Done Problem 1: Allowance 3 (20 p lohnson Company uses the allowance me hod for handling credit losses. Credit sales were $2,800,000 for this year. The balance of scounts receivable at the end of the year was $625,000. The allowance for doubtf ·counts had a beginning credit balance of 538,000 the adjusting journal entry to record the bad debt expense for this year if Johnson Company uses the percentage of sales method and estimates losses at 2% of credit sales. a. Give Give the adjust oumal entry to record the bad debt expense for this year if Johnsorn Company will pr b. uses the- ntage of accounts receivable method and estimates that 15% the allowance for doubtful accounts T-account under the peicentage of accounts receivable method if the beginning credit balance is $38,000 Allowance for Doubtful Accounts

Explanation / Answer

a.

Allowance for uncollectible during the year= 2 % of credit sales

= 2,800,000 * 2% = 56,000

Journal entry

b.

Allowance for uncollectible during the year = 15% of Accounts receivable

= 625,000 * 15% = 93,750

Beginning credit balance in the allowance for uncollectible = 38,000

Bad debt expense during the year = Allowance for uncollectible during the year - Beginning credit balance in the allowance for uncollectible

= 93,750 - 38,000 = 55,750

Journal entry

c.

Allowance for Doubtful Accounts

Bad debt expense 56,000 Allowance for uncollectible 56,000

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