10. At December 31 of the current year, a company reported the following: Total

Question

10. At December 31 of the current year, a company reported the following: Total credit sales for the current year are $620,000. Accounts receivable balance at December 31, end of current year is $190,000 Allowance for Doubtful Accounts balance at December 31 prior to recording the bad debt adjusting entry is a $1,500 credit balance. Prepare the necessary adjusting entries to record bad debts expense under each of the separate assumptions (a) The company uses the percent of sales method to estimate bad debt expense. It is estimated that 1.5% of credit sales will prove to be uncollectible. Two (2) points Date Account Titles and Explanation Debit Credit (b) The company used the percent of receivables method to estimate bad debt expense. It is estimated that 5% of accounts receivable will prove to be uncollectible. Two (2) points Date Account Titles and Explanation Debit Credit

Explanation / Answer

a Total credit sales for the period 6,20,000.00 Estimated baddebt expense @ 1.5% of above credit sales        9,300.00 Accounting title Debit $ Credit $ Dec-31 Baddebt expenses        9,300.00 To Allowance for doubtful accounts 9,300.00 (Being baddebt expense for the year ended on December 31 recorded) Total credit sales for the period 6,20,000.00 Estimated baddebt expense @ 1.5% of above credit sales        9,300.00 b Total credit sales for the period 1,90,000.00 Estimated baddebt expense @ 5% of above accounts receivables        9,500.00 Accounting title Debit $ Credit $ Dec-31 Baddebt expenses        9,500.00 To Accounts receivables 9,500.00 (Being baddebt expense for the year ended on December 31 recorded)

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