The ledger of Costello Company at the end of the current year shows Accounts Rec
ID: 2585359 • Letter: T
Question
The ledger of Costello Company at the end of the current year shows Accounts Receivable $132,000, Sales Revenue $859,000, and Sales Returns and Allowances $31,000.
If Allowance for Doubtful Accounts has a debit balance of $290 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales and (2) 8% of accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
No.
Date
Account Titles and Explanation
Debit
Credit
Dec. 31
Dec. 31
No.
Date
Account Titles and Explanation
Debit
Credit
(1)Dec. 31
(2)Dec. 31
Explanation / Answer
a) Sales revenue 859000 Less Sales return and allowance 31000 Net sales 828000 Net sales method percentage 1% Allowance for doubtful accounts at end 8280 Add Allowance for doubtful accounts at beginning 290 (debit balance) Bad debts expense 8570 Bad debt expense 8570 Allowance for doubtful accounts 8570 b) Accounts receivable 132000 Accounts receivable method percentage 8% Allowance for doubtful accounts at end 10560 Add Allowance for doubtful accounts at beginning 290 (debit balance) Bad debts expense 10850 Bad debt expense 10850 Allowance for doubtful accounts 10850
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