Hirdt Co. uses the percentage-of-receivables basis to record bad debt expense an

Question

Hirdt Co. uses the percentage-of-receivables basis to record bad debt expense and concludes that 4% of accounts receivable will become uncollectible. Accounts receivable are $572,400 at the end of the year, and the allowance for doubtful accounts has a credit balance of $3,250. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (b) If the allowance for doubtful accounts had a debit balance of $880 instead of a credit balance of $3,250, prepare the adjusting journal entry for bad debt expense. Compute interest and find the maturity date for the following notes. Presented below are data on three promissory notes. Determine the missing amounts.

Explanation / Answer

1) Ending Balance in Accounts Reeivable = 572400

4 % of A/R uncollectible

Under percentage of receivables method = 4 % of 572400 =$ 22896 uncollectible

Allowance for Doubtful debts credit balance = $3250

Bad debts = 22896 - 3250 =$ 19646

Journal entry

BAd debts Expense A/c $19646

To Allowance for doubtful debts $19646

If Allowance for doubtful debts has debit balance of $880

journal entry would be

BAd debts A/c Dr (22896+880) $23776

TO Allowance for Doubtful debts $23776

2) a ) Interest = 88200x7%x60/365 = 1015 Maturity date = 10 th August

b) Interest = 68500x8%x90/365 = $1351 MAturity date = 12oct

c) Interest = 14400x9%x75/365 = $266 Maturity date = 11 july

3) a) Total interest = 784200x11%x60/365 = $14180 Maturity date = 30 May

b) 580 = 87000xrx30/365

r = 580/7150.685

r = 8.11 or 8% MAturity date = 1 august

c) total interest = 113600x10%x6/12 =$ 5680 mAturity date = 3 sep

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