E8-4 The ledger of Macarty Company at the end of the current year shows Accounts

Question

E8-4 The ledger of Macarty Company at the end of the current year shows Accounts Receivable $78,000, Credit Sales S810,000, and Sales Returns and Allowances $40,000. Instructions (a) If Macarty uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Macarty determines that Matisse's S900 balance is uncollectible (b) If Allowance for Doubtful Accounts has a credit balance of $1,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable (c) If Allowance for Doubtful Accounts has a debit balance of $500 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.

Explanation / Answer

Journal entry :

No Date accounts & explanation debit credit a dec 31 Bad debt expense 900      Account receivable 900 (To record adjusting entry) b Dec 31 Allowance for doubtful accounts (78000*10%-1100) 6700       account receivable 6700 (To record adjusting entry) c Dec 31 Allowance for doubtful accounts (78000*8%+500) 6740      Account receivable 6740 (TO record adjusting entry)

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