Assume XYZ Company had $1 million in Sales this year. Assume Bad debts have aver

Question

Assume XYZ Company had $1 million in Sales this year. Assume Bad debts have average 1.5% of sales. Also Assume that on December 30th, the company’s Allowance for Doubtful Accounts showed a $1,000 credit balance. On December 31st, an aging schedule of their accounts receivable was prepared and shows the following:

Age | Amount | Estimated %Uncollectible

0-30 days| 70,000| 1.00%

31-60 Days|40,000 |5.00%

61-90 Days |25,000 |20.00%

91 or more days| 20,000 |40.00%

__________________________________

A. Assuming the Company uses the Percentage (%) of Sales Method, Give the (adjusting) journal entry to record the estimated bad debt for the year. This is the so-called “Income Statement approach”.

B. Assuming the Company uses the Aging of Accounts Receivable Method, Give the (adjusting) journal entry to record the estimated bad debt for the year. This is the so-called “Balance Sheet approach”.

Explanation / Answer

Adjusting entry no Accounting titles & explanations Debit Credit A) Bad debts expense 15000 Allowance for doubtful accounts 15,000 1,000,000*1.5%) Aging Schedule Age Amount % estimated 0--30 70,000 1% 700 31---60 40,000 5% 2000 61---90 25,000 20% 5000

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.