1. Arnold Corporation uses the allowance method for bad debt and estimates its b

Question

1.Arnold Corporation uses the allowance method for bad debt and estimates its bad debt expense at 2% of the Credit Sales. The balances of Arnold’s Accounts Receivable and Allowance for Doubtful Accounts on January 31st were $18,600(Dr) and 950(Cr), respectively. Credit Sales in February totalled $150,000. In February, $120,000 of Accounts Receivable were collected.

Dover prepares adjusting entries at the end of each month.

Required:

a.Prepare Journal Entries to record the Credit Sales, Collections and the Bad Debt Expense for February.

Credit

Account

Debit

Credit

Collections

Account

Debit

Credit

Feb. 28 (bad debt expense)

Account

Debit

Credit

Account

Debit

Credit

Explanation / Answer

Accounts Receivable 150000         Sales revenue 150000 Cash 120000       Accounts Receivable 120000 Bad debts expense 3000 =150000*2%       Allowance for Doubtful Accounts 3000

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