Question

In: Accounting

. During 2019, Alloway Inc. recorded credit sales of $750,000. Based on prior experience, it estimates...

. During 2019, Alloway Inc. recorded credit sales of $750,000. Based on prior experience, it estimates a 1.25 percent bad debt rate on credit sales. Required: a. Prepare journal entries for each transaction: 1- The appropriate bad debt expense adjustment was recorded for the year 2019. 2- On December 31, 2019, an account receivable for $1,500 from September of the current year was determined to be uncollectible and was written off. 5 b. Complete the following tabulation, indicating the amount and effect (+ for increase, - for decrease, and NE for no effect) of each transaction of letter a.

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Expert Solution

Answer :

Given Credi Sales for the year 2019 is $750,000

Estimated percentage of bad debt rate is 1.25% on credit sales

a.journal entries for each trasactions :

1.Bad debt expenses entry

Allowance for Doubtful Accounts =$750,000*1.25%=$9,375

Entry for this is as follows

31.12.2019   Bad Debt Expenses A/c Dr $9,375

To Allowance for Doubtful Accounts A/c Cr $9,375

(Being entry passed for estimated percentage of allowance for doubtful accounts)

2.account receivable of $1,500 is uncollectable :

entry for this is as follows:

31.12.2019    Allowance for Doubtful Accounts A/c   Dr $1,500

To Accounts Receivable A/c Cr $1,500

(Being entry passed for estimated percentage of allowance for doubtful accounts)

b.Tabulation form for above 2 trasactions

Transaction Date Particulars Increase /Decrease Amount
1 31.12.2019 1.25 percentage of allowance doubtful asset Increase $9,375
2 31.12.2019 account receivable of $1,500 is uncollectable Decrase $1,500
Net Balance of Allowance for Doubtful Account as on 31.12.2019 $7,875


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