The following information pertains to Jooners as of year end on 12/31 Sales duri

Question

The following information pertains to Jooners as of year end on 12/31

Sales during year

800,000 cash sales
1,400,000 credit sales

2,200,000 Total Sales

Accts Receivable 12/31 860,000
Allowance for Doubtful Accounts 7,000 credit balance

Outstanding Accounts

Not due 688,000
1-30 past 86,000
31-60 past 51,600
61-90 past 25,800
Over 90 8,600

% Uncollectible
Not due 2%
1-30 past 5%
31-60 past 9%
61-90 past 15%
Over 90 25%

Prepare the following entries

1. Adjusting entry on 12/31 after doing an aging of accounts receivable assuming the company uses the percentage of receivables approach for bad debt expense

2. Entry to record bad debt of $1200 from Smith Company that has gone bankrupt on 1/30

3. Assume the company uses % of credit sales and determines that 2% of credit sales are uncollectible prepare the adjusting entry

Explanation / Answer

1
Estimated Bad Debts = 0.02*688000 + 0.05*86000 + 0.09*51600 + 0.15*25800 + 0.25*8600
= $28794

Provision required - 28794 - 6000 = $22794

Profit-Loss A/C                                        22794
    To Allowance for Doubtful A/C                       22794

2
Bad Debt A/C                                1200
    To Accounts Receivable A/C               1200

Allowance for Doubtful A/C          1200
    To Bad Debt A/C                                    1200

3
Expected Bad Debt = 0.02*1400000 = $28000
Provision required = $28000 - $6000 = $22000

Profit-Loss A/C                                        22000
    To Allowance for Doubtful A/C                       22000

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