Estimating Bad Debts from Receivables Balances The following information is extr

Question

Estimating Bad Debts from Receivables Balances

The following information is extracted from Shelton Corporation's accounting records at the beginning of 2013: Accounts Receivable $64,000 Allowance for Doubtful Accounts 2,000 (credit) During 2013, sales on credit amounted to $582,000, $555,900 was collected on outstanding receivables and $2,900 of receivables were written off as uncollectible. On December 31, 2013, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance.

Required: 1. Prepare the journal entry necessary to record Shelton's estimate of bad debt expense for 2013

Explanation / Answer

Shelton Corporation Details Amt $ 2013 Opening Balance Accounts Receivable            64,000 Add :Credit Sales in 2014         582,000 Less : Collection of Receivables         (555,900) Less : Write off of Uncollectibles            (2,900) 2013 Closing Balance Accounts Receivable Gross            87,200 4% of Gross AR in 2013 end              3,488 So Allowance for Doubtful A/c balance required =              3,488 Allowance for Doubtful A/Cs balance existing              2,000 Additional Allowance required for 2013              1,488 Journal Entry Account Title Dr $ Cr $ Bad Debt Expense              1,488 Allowance for Doubtful Accounts               1,488

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