3. Claireco uses the allowance method to write off all bad debts. On 12/31/17 an

Question

3. Claireco uses the allowance method to write off all bad debts. On 12/31/17 an aged accounts receivable indicated that bad debt expense would be $35,000. The balance in the Allowance account on that date was a credit of $8,000. It was also estimated that the bac debts expense for the year would be 1% of the years credit sales of A. Assume that you want to inform the banking industry Stock holda $4,000,000. Required: what your bad debt exposure will be, make the journal entry required on 12/31/17. B. Assume that you want to inform the-banking-industry what your bad debt exposure will be, make the journal entry required on 12/31/17

Explanation / Answer

A, Journal on 12/31/17 To inform the Banking Industries

Bad Debts A/c Dr. $ 32,000 [ ($ 4,000,000*1/100) Less 8000 already avilable in Credit)

To Provision for Bad Debts $32,000

B  Journal on 12/31/17 To inform the Stock Holder.

Bad Debts A/c Dr. $ 35,000 [Full Bad debts will Provide even if 8000 already avilable in Credit)

To Provision for Bad Debts $35,000  

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