The ledger of Wainwright Company at the end of the current year shows Accounts R

Question

The ledger of Wainwright Company at the end of the current year shows Accounts Receivable $80,000; Credit Sales $817,000; and Sales Returns and Allowances $42,900. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

(a) If Wainwright uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Wainwright determines that Hiller’s $1,200 balance is uncollectible.

(b) If Allowance for Doubtful Accounts has a credit balance of $1,000 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 11% of accounts receivable.

(c) If Allowance for Doubtful Accounts has a debit balance of $590 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 9% of accounts receivable.

Explanation / Answer

Journal Entry Date Particulars Dr. Amt. Cr. Amt. a. Bad Debts                                                 Dr. 1200 To Accounts Receivables 1200 b. Bad Debts                                                 Dr. 7800 To Allowance for Doubtful debts 7800 Adjusting Amount for Allowance for Doubtful = 80000 X 11% - 1000 = 7800 c. Bad Debts                                                 Dr. 7790 To Allowance for Doubtful debts 7790 Adjusting Amount for Allowance for Doubtful = 80000 X 9% + 590 = 7790

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