For questions 4 to 5 The West Company uses the percent of ending A/Rmethod. Cred

Question

For questions 4 to 5

The West Company uses the percent of ending A/Rmethod. Credit sales for the yearwere $5,000,000. Ending Accounts Receivable was$300,000. Experience has shown that .005 of credit sales willbe uncollectible and that .09 of accounts receivable will beuncollectible. The credit balance in the allowance fordoubtful accounts on 12-31-x6 is $13,000 (prior to any entries forbad debts)

4       Give the entry needed on12-31-x9 for the West Company assuming that they use the percent ofending accounts receivable balance for recording bad debts.

Explanation / Answer

4

5

Ending AccountsReceivable $300,000 Uncollectible 9% of Accounts receivable Allowance for doubtfull account $13000 (cr.)

4

Bad debts expense $14,000        Allowance for doubtful accounts $14,000 {($3,00,000 X .09) - $13,000} Uncollectible accounts has $27000,allowance for doubtful accounts has already cr. Balance, therefore need toadjust with $14000 only.

5

    adjusted ending balance for theallowance for doubtful accounts on 12/31/09 is $27000 ($13,000 + $14,000)

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