In: Accounting
The following is an excerpt from an unadjusted trial balance of
Bob's BBQ Company:
DB CR
Accounts Receivable 12000
Notes Receivable, trade 2000
Allowance for Doubtful Accounts 200
Sales Revenue 1040000
Returned Sales 3000
Purchases 50000
Purchase Returns and Allowances 2000
Retained Earnings 15700
Required
Prepare the appropriate entries indicated below. Each item is
independent.
a) Record bad debt expense, assuming company experience indicates
that 40 percent of sales are on account and 2 percent of net credit
sales prove uncollectible.
b) Record bad debt expense if an aging schedule indicates that
$1,000 of the receivable at the end of this year will not be
collected.
c) Record bad debt expense if company policy requires the allowance
for doubtful accounts be maintained at 5 percent of total trade
receivables.
d) In April, four accounts totalling $500 were in excess of 90 days
old and were determined by the collection department to be
uncollectible.
e) In May of the year, one of the accounts written off in (d) was
paid in full in the amount of $200.
a)
Account Titles | Debit | Credit |
Bad Debt Expense | $ 8,296 | |
Allowance for Doubtful Accounts | $ 8,296 |
Bad Debt Expense = $(1040000-3000)*40%*2% = 8296
It is assumed that returned sales are also 40% on account of credit
sales.
b)
Account Titles | Debit | Credit |
Bad Debt Expense | $ 800 | |
Allowance for Doubtful Accounts | $ 800 |
c)
Account Titles | Debit | Credit |
Bad Debt Expense | $ 700 | |
Allowance for Doubtful Accounts | $ 700 |
d)
Account Titles | Debit | Credit |
Allowance for Doubtful Accounts | $ 500 | |
Accounts Receivable | $ 500 |
e)
Account Titles | Debit | Credit |
Accounts Receivable | $ 200 | |
Allowance for Doubtful Accounts | $ 200 | |
Cash | $ 200 | |
Accounts Receivable | $ 200 |