Question

In: Accounting

On December 31st, 2020, Winterfell Corporation had the following account balances before adjustments: Debit Credit Accounts...

On December 31st, 2020, Winterfell Corporation had the following account balances before adjustments: Debit Credit Accounts Receivable 325,000 Allowance for Doubtful Accounts 1,250 Credit Sales 1,645,000 Required Assume that uncollectible accounts are estimated to be 5% of accounts receivables. Prepare the necessary adjusting entry with December 31, 2020 as the entry date. Following the adjusting entry, what is the total that will appear on the Balance Sheet for Allowance for Doubtful Account? Assume that uncollectible accounts are estimated to be 2% of credit sales. Prepare the necessary adjusting entry with December 31, 2020 as the entry date. Following the adjusting entry, what is the total that will appear on the Balance Sheet for Allowance for Doubtful Account?

Solutions

Expert Solution

a)

Accounts receivable ending balance = $325,000

Percentage estimated as uncollectible = 5%

Existing credit balance in allowance for doubtful accounts = $1,250

Bad Debt Expense = (Accounts receivable ending balance x percentage estimated as uncollectible) – Existing credit balance in allowance for doubtful accounts

= (325,000 x 5%) - 1,250

= 16,250 - 1,250

= $15,000

Journal

Dec. 31, 2020

Bad debt expense

15,000

Allowance for doubtful accounts

15,000

Allowance for doubtful accounts to apper in the balance sheet = Accounts receivable ending balance x percentage estimated as uncollectible

= 325,000 x 5%

= $16,250

b)

Credit Sales = $1,645,000

Bad Debt Expense = 2% of credit sales

= 1,645,000 x 2%

= $32,900

Journal

Dec. 31, 2020

Bad debt expense

32,900

Allowance for doubtful accounts

32,900

Allowance for doubtful accounts to apper in the balance sheet = Existing credit balance in allowance for doubtful accounts + Bad Debt Expense

= 1,250 + 32,900

= $34,150

ekkarill92 answered 2 years ago
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