Question

In: Accounting

Lafayette Corporation is a leading manufacturer of sports apparel, shoes, and equipment. The company’s 2021 financial...

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 Sheet: Accounts Receivable, net $3,897 $3,461
Income Statement: Sales Revenue $34,970 $32,996



A note disclosed that the allowance for doubtful accounts had a balance of $23 million and $47 million at the end of 2021 and 2020, respectively. Bad debt expense for 2021 was $44 million. Assume that all sales are made on a credit basis.


Required

  1. What is the amount of gross (total) accounts receivable due from customers at the end of 2021 and 2020?
  2. Record the summary journal entry for Sales Revenue for 2021.
  3. Record the journal entry to recognize Bad Debt Expense for 2021.
  4. Write-offs of Accounts Receivable:
    1. What is the amount of bad debt write-offs during 2021?
    2. Record the journal entry for the bad debt write-offs for 2021.
  5. Collections of Accounts Receivable:
    1. Analyze changes in the gross accounts receivable account to calculate the amount of cash received from customers during 2021.
    2. Record a summary journal entry to record collections of all receivables for 2021.

Solutions

Expert Solution

Part 1

2021 2020
Accounts receivable, net $ 3,897 $ 3,461
Add: allowance for uncollectible accounts $ 23 $ 47
Accounts receivable, gross $ 3,920 $ 3,508

Part 2

Date General Journal Debit Credit
2021 Accounts Receivable 34,970
Sales Revenue 34,970

Part 3

Date General Journal Debit Credit
2021 Bad debt expense 44
Allowance for doubtful accounts 44

Part 4

1.

Beginning allowance for uncollectible accounts $              47
Add: bad debts expense $              44
Less: Ending allowance for uncollectible accounts $ (23)
Bad debts write-offs $              68

2.

Date General Journal Debit Credit
2021 Allowance for doubtful accounts 68
Accounts Receivable 68

Part 5

1.

Beginning Accounts receivable, gross $        3,508
Add: credit sales of 2021 $ 34,970
Less: Ending Accounts receivable, gross $ (3,920)
Less: Bad debts write-offs $           (68)
Cash Received from customers $ 34,490
Accounts receivable (Gross)
Event Debit Credit Event
Beg. Bal $        3,508
Credit Sales $ 34,970 $ 34,490 Cash received
$ 68 Bad debts write-offs
End. Bal $ 3,920

2.

Accounts receivable (net)
Beginning net accounts receivable $        3,461
Add: Credit sales of 2021 $ 34,970
Less: Cash received $ (34,490)
Add: bad debts expense $ (44)
Bad debts write-offs (No impact on net amount) $ 0
Ending net accounts receivable $        3,897

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