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The ledger of Costello Company at the end of the current year shows Accounts Rec

ID: 2512273 • Letter: T

Question

The ledger of Costello Company at the end of the current year shows Accounts Receivable $149,000, Sales Revenue $857,000, and Sales Returns and Allowances $23,000.

Exercise 9-3 The ledger of Costello Company at the end of the current year shows Accounts Recelvable $149,000, Sales Revenue $857,000, and Sales Returns and Allowances $23,000. If Costello uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at Decernber 31, assuming Costello detenes that L. Dole's $1,900 balarice is uricollectible. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Date Account Titles and Explanation Debit Credit Dec. 31 LIST OF ACCOUNTS INK TO TEXT If Allowance for Doubtful Accounts has a credit balance of S2,800 In the trial balance, joumalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 3% of net sales, and (2) 10% of accounts receivable. (credit account titles are automatically idented when amount is entered. Do not indent manually.) No. Date (1) Dec.31 Account Titles and Explanation Deblt Credit (2) Dec. 31

Explanation / Answer

9.3

A. Dec 31

Bad Debts A/c Dr $1,900

To Accounts Receivable A/c $1,900

B.

Net Sales = 857000 - 23000

= $834,000

3% of Net Sales = 834000 * 3%

= $25,020.

Accounts Receivable = $149,000

10% of Accounts Receivable = 149000 * 10%

= $14,900.

(1) Dec 31

Allowance for Doubtful Debts A/c Dr $2,800

Bad Debts A/c Dr $22,220

To Accounts Receivable A/c $25,020

(2) Dec 31

Allowance for Doubtful Debts A/c Dr $2,800

Bad Debts A/c Dr $12,100

To Accounts Receivable A/c $14,900

(OR)

(1) Increase Allowance for Doubtful Debts balance to meet the provision

Profit & Loss A/c Dr 22,220

To Allowance for Doubtful Debts A/c 22,220

Allowance for Doubtful Debts A/c Dr 25,020

To Accounts Receivable A/c 25,020

(2) Increase Allowance for Doubtful Debts balance to meet the provision

Profit & Loss A/c Dr 12,100

To Allowance for Doubtful Debts A/c 12,100

Allowance for Doubtful Debts A/c Dr 14,900

To Accounts Receivable A/c 14,900

C.

Net Sales = 857000 - 23000

= $834,000

2% of Net Sales = 834000 * 2%

= $16,680.

Accounts Receivable = $149,000

8% of Accounts Receivable = 149000 * 8%

= $11,920.

(1) Dec 31

Bad Debts A/c Dr $16,900

To Allowance for Doubtful Debts A/c $220

To Accounts Receivable A/c $16,680

(2) Dec 31

Bad Debts A/c Dr $12,140

To Allowance for Doubtful Debts A/c $220

To Accounts Receivable A/c $11,920

(OR)

(1) Increase Allowance for Doubtful Debts balance to meet the provision

Profit & Loss A/c Dr 16,900

To Allowance for Doubtful Debts A/c 16,900

Allowance for Doubtful Debts A/c Dr 16,900

To Accounts Receivable A/c 16,900

(2) Increase Allowance for Doubtful Debts balance to meet the provision

Profit & Loss A/c Dr 12,140

To Allowance for Doubtful Debts A/c 12,140

Allowance for Doubtful Debts A/c Dr 12,140

To Accounts Receivable A/c 12,140

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