Question

The trial balance before adjustment of Skysong, Inc. shows the following balances:

		Dr.		Cr.
Accounts receivable		$105,900
Allowance for doubtful accounts		2,000
Sales revenue (all on credit)				$687,000
Sales returns and allowances		28,400

Give the entry for bad debt expense for the current year assuming the allowance should be 3% of gross accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Give the entry for bad debt expense for the current year assuming historical records show that, based on accounts receivable aging, the following percentages will not be collected: (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

		Balance		Percentage Estimated to Be Uncollectible
0–30 days outstanding		$37,200		1%
31–60 days outstanding		47,000		5%
61–90 days outstanding		13,200		12%
Over 90 days outstanding		8,500		18%

Account Titles and Explanation	Debit	Credit
enter an account title

Give the entry for bad debt expense for the current year assuming allowance for doubtful accounts is $2,000 but it is a credit balance and the allowance should be 3% of gross accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

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List of Accounts

  

  

Give the entry for bad debt expense for the current year assuming allowance for doubtful accounts is $2,000 but it is a credit balance and historical records show that the following percentages will not be collected: (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

		Balance		Percentage Estimated to Be Uncollectible
0–30 days outstanding		$37,200		1%
31–60 days outstanding		47,000		5%
61–90 days outstanding		13,200		12%
Over 90 days outstanding		8,500		18%

Account Titles and Explanation	Debit	Credit

List of Accounts

• Accounts Payable
• Accounts Receivable
• Accrued Liabilities
• Accumulated Depreciation - Equipment
• Advances to Employees
• Advertising Expense
• Allowance for Doubtful Accounts
• Allowance for Sales Returns and Allowances
• Bad Debt Expense
• Bank Charges Expense
• Cash
• Cash Over and Short
• Due from Factor
• Entertainment Expense
• Equipment
• Finance Expense
• Finance Revenue
• Freight in
• Freight out
• Gain on Disposal of Equipment
• Gain on Disposal of Land
• Interest Expense
• Interest Income
• Interest Receivable
• Inventory
• Land
• Loss on Disposal of Equipment
• Loss on Disposal of Land
• Loss on Disposal of Receivables
• Loss on Impairment
• Miscellaneous Expense
• No Entry
• Notes Payable
• Notes Receivable
• Office Expense
• Petty Cash
• Postage Expense
• Prepaid Expenses
• Purchase Discounts
• Recourse Liability
• Refund Liability
• Rent Expense
• Sales Discounts
• Sales Discounts Forfeited
• Sales Returns and Allowances
• Sales Revenue
• Servicing Liability
• Service Revenue
• Supplies
• Supplies Expense
• Unearned Revenue

Answer 1

Answer a.

Estimated uncollectible = 3% * Gross accounts receivable
Estimated uncollectible = 3% * $105,900
Estimated uncollectible = $3,177

Bad debt expense = Estimated uncollectible + Debit balance of allowance for doubtful accounts
Bad debt expense = $3,177 + $2,000
Bad debt expense = $5,177

Answer b.

Estimated uncollectible = 1% * $37,200 + 5% * $47,000 + 12% * $13,200 + 18% * $8,500
Estimated uncollectible = $5,836

Bad debt expense = Estimated uncollectible + Debit balance of allowance for doubtful accounts
Bad debt expense = $5,836 + $2,000
Bad debt expense = $7,836

Answer c.

Bad debt expense = Estimated uncollectible - Credit balance of allowance for doubtful accounts
Bad debt expense = $3,177 - $2,000
Bad debt expense = $1,177

Answer d.

Bad debt expense = Estimated uncollectible - Credit balance of allowance for doubtful accounts
Bad debt expense = $5,836 - $2,000
Bad debt expense = $3,836