DUE ASAP POINTS IMMEDIATLY The ledger of Montgomery Company at the end of the cu

Question

DUE ASAP POINTS IMMEDIATLY

The ledger of Montgomery Company at the end of the current year shows Accounts Receivable $80,000; Credit Sales $817,000; and Sales Returns and Allowances $49,900. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) If Montgomery uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Montgomery determines that Baruth's $810 balance is uncollectible. 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 12% of accounts receivable. If Allowance for Doubtful Accounts has a debit balance of $950 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.

Explanation / Answer

Hi,

Please find the detailed answer as follows:

Part A:

Bad Debt Expense Dr. 810

Accounts Receivables - Baruth's Account Cr. 810

Part B:

Bad Debt Expense (817000 - 49900)*1% Dr. 7671

Allowance for Doubtful Debts Cr. 7671

Part C:

Bad Debt Expense (80000*10% + 950)*1% Dr. 8950

Allowance for Doubtful Debts Cr. 8950

Thanks.

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