Question

Donovan Carrier Corp has an Accounts Receivable Balance of $1,065,000 and an Allowance for Doubtful Accounts of $99,500 as of 12/31/18. In 2019, Donovan has credit sales of $2,900,000 and collections on account of $3,020,000. They write-off $103,000 in uncollectible accounts in 2019. Their financial manager estimates 14% of their accounts receivable will be uncollectible as of 12/31/19.

REQUIRED : Provide the journal entry for Donovan for the account write-offs for 2019.

REQUIRED : Provide the adjusting journal entry for Donovan for the bad debt expense on December 31, 2019.

REQUIRED : Provide the Net Realizable Value of Accounts Receivable for Donovan on December 31, 2019.

REQUIRED : Provide the bad debt expense for Donovan with all of the same facts as above, but assume the financial manager uses 6% (instead of 14%) of the Accounts receivable balance for the Allowance for Uncollectible Accounts on December 31, 2019.

Answer 1

Requirement 1:

Account title and explanation	Debit	Credit
Allowance for doubtful account	$103,000
Accounts receivable		$103,000
[To record written off of uncollectibles]

Requirement 2:

Account title and explanation	Debit	Credit
Bad debt expense	$121,380
Allowance for doubtful account		$121,380
[To record bad debt expense]

Calculations:

Accounts receivable
Beg.Bal.	$1,065,000	Collections	$3,020,000
Sales	$2,900,000	Written off	$103,000
End. Bal.	$842,000
Allownance for doubtful accounts
Written off	$103,000	Beg. Bal.	$99,500
		Bad debt expense [Balance amount]	$121,380
		End. Bal. [$842,000 x 14%]	$117,880

Requirement 3:

Accounts receivable	$842,000
Allowance for doubtful accounts	($117,880)
Net realized value	$724,120

Requirement 4:

Account title and explanation	Debit	Credit
Bad debt expense	$54,020
Allowance for doubtful account		$54,020
[To record bad debt expense]

Calculations:

Accounts receivable
Beg.Bal.	$1,065,000	Collections	$3,020,000
Sales	$2,900,000	Written off	$103,000
End. Bal.	$842,000
Allowance for doubtful accounts
Written off	$103,000	Beg. Bal.	$99,500
		Bad debt expense [Balance amount]	$54,020
		End. Bal. [$842,000 x 6%]	$50,520