In: Accounting
. 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.
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 |