Question

Prepare journal entries to record the following items affecting the Allowance for Bad Debts account for Chief Ugundi. Show work on calculations supporting your amounts.

Chief Ugundi reported $500,000 as total credit sales for the period with related costs of $350,000.

Account	Debit	Credit

Calculate the Gross margin % on the above sales ________.

Based on past experience, he estimated that 4% of total credit sales would NOT be collected.

Account	Debit	Credit

Chief Ugundi gave up trying to collect what Gilligan owed him for previous purchases and decided to write off the account balance in full. The amount owed totaled $6,000.

Account	Debit	Credit

Chief Ugundi received $2,000 from Gilligan after he had written off the account in full.

Account	Debit	Credit

After Chief Ugundi threatens to have the local witchdoctor perform voodoo on them, the Howell’s sign a note receivable earning 12% for $8,000 remaining on their account. The entire note receivable balance is due in 6 months.

Account	Debit	Credit

Mrs. Howell took Chief Ugundi’s threat seriously and paid the $8,000 owed plus interest when the note became due in 6 months. Record the receipt of Cash below.

Account	Debit	Credit

For the next year, Chief Ugundi estimated that the allowance for bad debts at the end of the period should equal 15% of the accounts receivable balance. At the end of the period, the total for Accounts Receivables was $200,000 and the amount in the allowance for bad debts was $7,000.

Account	Debit	Credit

Chief Ugundi gave up trying to collect what the Skipper owed him for previous purchases and decided to write off the account balance in full. The amount owed totaled $5,000.

Account	Debit	Credit

Chief Ugundi received $3,000 from the Skipper after he had written off the account in full.

Account	Debit	Credit

After Chief Ugundi threatens to have the local witchdoctor perform voodoo on them, Ginger and Mary Ann sign a note receivable earning 10% for $12,000 remaining on their account. The entire note receivable balance is due in 8 months.

Account	Debit	Credit

Neither Ginger nor Mary Ann took Chief Ugundi’s threat seriously and decided NOT to pay the $12,000 owed. Accordingly, the note was recorded as dishonored when the note became due in 8 months.

           

Account	Debit	Credit

Chief Ugundi wrote off the delinquent account with Ginger and Mary Ann after all castaways were rescued from the island.

Account	Debit	Credit

Answer 1

Chief Ugundi reported $500,000 as total credit sales for the period with related costs of $350,000

	Debit	Credit
Accounts receivable	$500,000
Cost of goods sold	$350,000
Sales		$500,000
Inventory		$350,000

Calculate the Gross margin % on the above sales =30%.

= (500,000-350,000)/500,000 = 0.3 = 30%

Based on past experience, he estimated that 4% of total credit sales would NOT be collected.

	Debit	Credit
Bad debts	$20,000
Allowance for doubtful debts		$20,000

Chief Ugundi gave up trying to collect what Gilligan owed him for previous purchases and decided to write off the account balance in full. The amount owed totaled $6,000.

	Debit	Credit
Allowance for doubtful debts	$6,000
Accounts receivable		$6,000

Chief Ugundi received $2,000 from Gilligan after he had written off the account in full.

	Debit	Credit
Accounts receivable	$2,000
Allowance for doubtful debts		$2,000
Cash	$2,000
Accounts receivable		$2,000

After Chief Ugundi threatens to have the local witchdoctor perform voodoo on them, the Howell’s sign a note receivable earning 12% for $8,000 remaining on their account. The entire note receivable balance is due in 6 months.

	Debit	Credit
Notes receivable	$8,000
Accounts receivable		$8,000

Mrs. Howell took Chief Ugundi’s threat seriously and paid the $8,000 owed plus interest when the note became due in 6 months. Record the receipt of Cash below.

	Debit	Credit
Cash	$8,480
Notes receivable		$8,000
Interest		$480

For the next year, Chief Ugundi estimated that the allowance for bad debts at the end of the period should equal 15% of the accounts receivable balance. At the end of the period, the total for Accounts Receivables was $200,000 and the amount in the allowance for bad debts was $7,000

	Debit	Credit
Bad debts (200,000x15% - 7000)	$23,000
Allowance for doubtful debts		$23,000

.Chief Ugundi gave up trying to collect what the Skipper owed him for previous purchases and decided to write off the account balance in full. The amount owed totaled $5,000.

	Debit	Credit
Allowance for doubtful debts	$5,000
Accounts receivable		$5,000

Chief Ugundi received $3,000 from the Skipper after he had written off the account in full.

	Debit	Credit
Accounts receivable	$3,000
Allowance for doubtful debts		$3,000
Cash	$3,000
Accounts receivable		$3,000

After Chief Ugundi threatens to have the local witchdoctor perform voodoo on them, Ginger and Mary Ann sign a note receivable earning 10% for $12,000 remaining on their account. The entire note receivable balance is due in 8 months.

	Debit	Credit
Notes receivable	$12,000
Accounts receivable		$12,000

Neither Ginger nor Mary Ann took Chief Ugundi’s threat seriously and decided NOT to pay the $12,000 owed. Accordingly, the note was recorded as dishonored when the note became due in 8 months.

	Debit	Credit
Accounts receivable	$12,000
Notes receivable		$12,000

Chief Ugundi wrote off the delinquent account with Ginger and Mary Ann after all castaways were rescued from the island.

	Debit	Credit
Allowance for doubtful debts	$12,000
Accounts receivable		$12,000