Question

Lafayette Corporation is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2021 financial statements contain the following information ($ in millions):

	2021	2020
Balance sheets:
Accounts receivable, net	$3,842	$3,406
Income statements:
Sales revenue	$34,815	$32,841

A note disclosed that the allowance for uncollectible accounts had a balance of $22 million and $46 million at the end of 2021 and 2020, respectively. Bad debt expense for 2021 was $43 million. Assume that all sales are made on a credit basis.

1. Record the journal entry to recognize Bad Debt Expense for 2021.
2. 2. Record a summary journal entry to record collections of all receivables for 2021.

Answer 1

1.

Journal

December 31, 2021	Bad Debt Expense	43
	Allowance for uncollectible accounts		43
	(To record Bad Debt Expense)

2.

Accounts receivables, net 2021 = $3,842 million

Allowance for uncollectible accounts, 2021 = $22 million

Accounts receivables, gross 2021 = Accounts receivables, net 2021 + Allowance for uncollectible accounts, 2021

= 3,842 + 22

= $3,864 million

Accounts receivables, net 2020 = $3,406 million

Allowance for uncollectible accounts, 2020 = $46 million

Accounts receivables, gross 2020 = Accounts receivables, net 2020 + Allowance for uncollectible accounts, 2020

= 3,406 + 46

= $3,452 million

Sales revenue for 2021 = $34,815 million

Cash received from customers during 2021 = Sales revenue for 2021 + Accounts receivables, gross 2020 - Accounts receivables, gross 2021

= 34,815 + 3,452 - 3,864

= $34,403 million

Journal

December 31, 2021	Cash	34,403
	Accounts receivables		34,403
	(To record cash collections)