Question

Uncollectible Accounts—Percentage of Sales and Percentage of Receivables

At the end of the current year, the accounts receivable account of Glenn's Nursery Supplies has a debit balance of $390,000. Credit sales are $2,780,000. Record the end-of-period adjusting entry on December 31, in general journal form, for the estimated uncollectible accounts. Assume the following independent conditions existed prior to the adjustment:

1. Allowance for Doubtful Accounts has a credit balance of $1,860.

a. The percentage of sales method is used and bad debt expense is estimated to be 1% of credit sales. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31						1
2							2
3							3

b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $30,330 in uncollectible accounts. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31						1
2							2
3							3

2. Allowance for Doubtful Accounts has a debit balance of $1,950.

a. The percentage of sales method is used and bad debt expense is estimated to be ¾ of 1% of credit sales. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31						1
2							2
3							3

b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $29,890 in uncollectible accounts. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31						1
2							2
3							3

Answer 1

Record the end-of-period adjusting entry on December 31, in general journal form, for the estimated uncollectible accounts. Assume the following independent conditions existed prior to the adjustment:

1. Allowance for Doubtful Accounts has a credit balance of $1,860.

a. The percentage of sales method is used and bad debt expense is estimated to be 1% of credit sales. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31	Bad debt expense (2780000*1%)			278000		1
2		Allowance for doubtful accounts				278000	2
3		(To record bad debt expense)					3

b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $30,330 in uncollectible accounts. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31	Bad debt expense (30330-1860)			28470		1
2		Allowance for doubtful accounts				28470	2
3		(to record adjusting entry)					3

2. Allowance for Doubtful Accounts has a debit balance of $1,950.

a. The percentage of sales method is used and bad debt expense is estimated to be ¾ of 1% of credit sales. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31	Bad debt expense (2780000*1%*3/4)			208500		1
2		Allowance for doubtful accounts				208500	2
3		(To record adjusting entry)					3

b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $29,890 in uncollectible accounts. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31	Bad debt expense (29890+1950)			31840		1
2		Allowance for doubtful accounts				31840	2
3		(To record adjusting entry)					3