In: Accounting
The Manda Panda Company uses the allowance method to account for
bad debts. At the beginning of 2018, the allowance account had a
credit balance of $75,000. Credit sales for 2018 totaled $2,400,000
and the year-end accounts receivable balance was $490,000. During
this year, $73,000 in receivables were determined to be
uncollectible. Manda Panda anticipates that 3% of all credit sales
will ultimately become uncollectible. The fiscal year ends on
December 31.
Required:
1. Does this situation describe a loss
contingency?
2. What is the bad debt expense that Manda Panda
should report in its 2018 income statement?
3. Prepare the appropriate journal entry to record
the contingency.
4. Complete the table below to calculate the net
realizable value Manda Panda should report in its 2018 balance
sheet.