answers the question. 31) At December 31, 2016, a companys records incl $750,000

Question

answers the question. 31) At December 31, 2016, a companys records incl $750,000 225,00 Net Sales (all on credit) Accounts Receivable at December 31 Write-offs of Accounts Receivable during the year 7.100 Credit balance in Allowance for Doubtful Accounts at January . 2016 8,500 Required: Part a. The company estimates bad debts as 1.3% of credit sales. Prepare the required adjusting entry to record Bad Debt Expense for the year. ume instead that the company uses the aging of receivables method. Part b. Ass Its aging analysis reveals that the estimate of uncollectible receivables is $11,250. Prepare the required adjusting entry to record Bad Debt Expense for the year. Part c. Assume instead that the company estimates that its Bad Debt Expense for the year is $8,250. Use a T-account to determine the adjusted balance in the Allowance for Doubtful Accounts

Explanation / Answer

Solution:-

Part A:-

Credit Sales:- $ 750,000

Bad Debts:- 1.3% of Credit Sales

= 750000*1.3%= $9750

Balance of Allowance for Bad Debt = $8500

Adjusting Entry:-

1. Bad Debts Expesnes A/c Dr $9750

To Receivables A/c $9750

(Being Bad Debts expenses booked)

2. Profit and Loss Account Dr $ 1250 (9750-8500)

Allowance for Bad Debts A/c Dr $ 8500

To Bad Debts Expenss A/c $9750

(Being Bad Debts Expenses Charged)

Part B:-

Estimate of Uncollectible Receivables= $11250

Adjusting Entry

1. Bad Debts A/c Dr $11250

To Receivables A/c $11250

(Being Bad Debts Expenses Booked)

2. Profit and Loss Account Dr $2750 (11250-8500)

Allowance for Bad Debt A/c $8500

To Bad Debt Expenses A/c $11250

(Being Bad Debts Expenses Charged)

Part C:-

1. Bad Debts Expesnes A/c Dr 8250

To Receivables A/c $8250

(Being Bad Debts Expenses has been booked)

2. Allowances for Bad Debt A/c Dr $8250

To Bad Debt expesnes A/c $8250

(Being Bad Debts Expenses Charged against alllowance balance)

Allowance for Doubtful Debt A/c Dr Amount Cr Amount To Bad Debts Expenses 8250 By Balance b/d 8500 To Balance c/f 250 8500 8500

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