Assume that Simple Co. had credit sales of S280,000 and cost of goods sold of $1

Question

Assume that Simple Co. had credit sales of S280,000 and cost of goods sold of $165,000 for the period It estimates that 2 percent of credit sales in uncollectible accounts when it uses the percentage of credit sales method and it estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $6,900 when it uses the aging method. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $400 1. Prepare the journal entry to record the end-of-period adjustment for bad debts under the (a) percentage of credit sales method and (b) aging of accounts receivable method. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list 0 Assume Simple Co. had credit sales of s28o,000 and cost of goods sold of $165,000 for the period. Simple uses the percentage of credit sales method and estimates that 2 percent of credit sales would result in uncollectible accounts. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $400. Record the transaction. ld of ethod ble 2 Assume that Simple Co. had credit sales of $280,000 andCredit cost of goods sold of $165,000 for the period. Simple uses the aging method and estimates that the appropriate ending balance in the Allowance for Doubtful Accounts is $6,900. Before the end-of-period adjustment is made, the Allowance for Doubtful Accounts has a credit balance of $400. Record the transaction. Note : journal entry has been entered Record entry Clear entry View general journal

Explanation / Answer

Answer a Journal entry to record end of year adjustment for bad debts under percentage of credit sales method Journal   Date Account Titles Debit Credit Bad debt expense $5,600 Allowance for Doubtful accounts $5,600 Bad debt expense = Credit sales * 2% = $280000*2% = $5600 Answer b Journal entry to record end of year adjustment for bad debts under aging of accounts receivable method Journal   Date Account Titles Debit Credit Bad debt expense $6,500 Allowance for Doubtful accounts $6,500 Bad debt expense = Estimated ending credit balance in Allowance for doubtful account - Before adjustment ending credit balance in allowance for doubtful account Bad debt expense = $6900 - $400 = $6500

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