PLUS Kieso, Intermediate Accounting, 16e study & Practice Gredebook oRION Downoa

Question

PLUS Kieso, Intermediate Accounting, 16e study & Practice Gredebook oRION Downoadable eTextbook R Start Time: 05 58 PM / Remaining: 30 mn Problem 162 The trial balance bofore adjustment of Risen Company reports the following balances ems (Chs $143,000 Accounts receivable Allowance for doubtful accounts $1,570 Sales (all on credit) Sales returns and allowances 53,000 Prepare the entry for estimated bad debts assuming that doubtful accouts are estimated to be i4% ef gross oro nts receivable Chot ecwnt see aeaeomakar mdeindam ae entered. Do not indent manually.) Account itlies and Explanation instead of a wedit balance. Prepare the joumal entry. (Credi Assume that all the information above is the same, except that the Allowance for Doubeful accounts has a debit halance of $1,570 titles are automatically indented when the amount is entered. Do not indent amanualy Credit Account Titles and Explanation Thin PC

Explanation / Answer

Solution: 1st Account Titles and Explanation Debit Credit Bad Debt Expense 18,450 Allowance for Doubtful Accounts 18,450 Working Notes: Estimate is that doubtful account = 14% of gross accounts receivable There is already allowance for doubtful accounts = $1,570 Allowance for doubtful accounts 20,020 [gross accounts receivable x estimated rate] [$143,000 x 14% = 20,020] Less: Already allowance made $1,570 Bad debt expense $18,450 2nd Account Titles and Explanation Debit Credit Bad Debt Expense 21,590 Allowance for Doubtful Accounts 21,590 Working Notes: Estimate is that doubtful account = 14% of gross accounts receivable There is already allowance for doubtful accounts = $1,570 but debit balance Allowance for doubtful accounts 20,020 [gross accounts receivable x estimated rate] [$143,000 x 14% = 20,020] Add: Already allowance in debit balance $1,570 Bad debt expense $21,590 Notes: Allowance for doubtful accounts should be in credit balance Please feel free to ask if anything about above solution in comment section of the question.

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