Cornerstone Exercise 5-25 (Algorithmic) Percentage of Credit Sales Clarissa Comp

Question

Cornerstone Exercise 5-25 (Algorithmic) Percentage of Credit Sales Clarissa Company has credit sales of $521,000 during 2019 and estimates at the end of 2019 that 2.5% of these credit sales will eventually default. Also, during 2019 a customer defaults on a $770 balance related to goods purchased in 2018. Prior to the write-off for the $770 default, Clarissa's accounts receivable and allowance for doubtful accounts balances were $402,000 and $129 (credit), respectively Required: 1. Prepare the journal entry to record the defaulted account Record write-off of defaulted account 2. Prepare the adjusting entry to record the bad debt expense for 2019. Record adjusting entry for bad debt expense estimate

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1. Journal Entry to record defaulted account Account debit credit Allowance for bad debt 770 Accounts Receivable 770 (write off of defaulted account) 2.Adjusted entry to record bad debt expense for 2019 Account debit credit Bad Debt expense (770+13025-129) 13666 Allowance for bad debt 13666 (adjusting entry for bad debt estimate) Beginning Balance 129 Less: Write off -770 Closing Balance needed 521000*2.5% -13025 To be posted during 2019 -13666

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