Sheridan Company uses the percentage of sales method to record bad debt expense. It estimates that...

Sheridan Company uses the percentage of sales method to record bad debt expense. It estimates that 2% of net credit sales (all made on account) will become uncollectible. Sheridan Company reported the following information in its general ledger for the year ended September 30, 2021:

Sales
Debit	Credit
	954,000
Accounts Receivable
Debit	Credit
257,000
Allowance for Doubtful Accounts
Debit	Credit
	2,000

1) Prepare the adjusting entry to record bad debt expense at year end.

2) Calculate the carrying amount of accounts receivable on September 30, 2021.

Expert Solution

1. Bad Debt Expenses Adjusting Entries- Have Two Methods. (i). Direct Write-off method, (ii). Allowance Method.

(i). Direct Write-off Method:

Sl.no	Account title	Debit	Credit
a.	Bad Debt Expenses	$19,080
	Accounts Receivable-Creditors		$ 19,080
	(To record the write-off of Creditors account.)

(ii). Allowance Method:

Sl.no	Account title	Debit	Credit
b.	Bad Debt Expenses	$19,080
	Allowance for Doubtful Accounts		$ 19,080
	(To record the estimate of uncollectible accounts)

*Bad debt expense = $954,000* 2% = $19,080;

*Allowance for Doubtful Accounts after adjustment =$19,080+$2,000 = $21,080;

2.

*Balance of Account Receivable on September 30, 2021:,

Net of doubtful accounts = [$257,000 - $21,080] = $235,920.

****************************************************************************************************

If you have any doubts, drop your messages in the comment box! Thank you!!! ALL THE BEST!!!! Please rate this answer, If you like the answer, kindly raise your THUMBS-UP button.
#STAY SAFE

ekkarill92 answered 2 years ago

Question: Peoples Company uses the percentage of Sales method to determine bad debt expense; based on...

Question: Peoples Company uses the percentage of Sales method to determine bad debt expense; based on company's history, 3% of the Sales balance will be uncollectible. Year Sales Write-offs Accounts Receivable 20x5 $5,000,000 $1,000,000 20x6 $7,000,000 $120,000 $1,200,000 20x7 $9,000,000 $190,000 $1,400.000 20x8 $10,000,000 $200,000 $1,600,000 Based on the information above, determine, the following: A. Bad Debt Expense B.Allowance for Uncollectible Accounts: view the Written Example to see how to calculate, there is a spreadsheet attached. C. Net Realizable Value...

Crane Company uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance) $550,000...

Crane Company uses the percentage-of-receivables basis to record bad debt expense. Accounts receivable (ending balance) $550,000 (debit) Allowance for doubtful accounts (unadjusted) 5,300 (debit) The company estimates that 2% of accounts receivable will become uncollectible. (a) Prepare the adjusting journal entry to record bad debt expense for the year. (Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (b) What is the ending (adjusted) balance in Allowance for Doubtful...

Custom Designs, Inc. uses the allowance method to estimate and record bad debt expense. It has...

Custom Designs, Inc. uses the allowance method to estimate and record bad debt expense. It has an accounts receivable balance of $90,000 and an allowance for uncollectible accounts credit balance of $6,200. Suppose an account receivable balance of $1,200 from one customer is determined to be uncollectible and is written off. What was the net accounts receivable amount before and after the write off? On January 1, 20X1, Mechanical Engineers, Inc. had an accounts receivable balance of $506,000 and a...

Mel's Hardware uses the allowance method to determine their bad debt expense. The allowance for bad...

Mel's Hardware uses the allowance method to determine their bad debt expense. The allowance for bad debts is based on the balance in the accounts receivable account. Mel's hardware uses the rate of 0.75% of accounts receivable to determine the appropriate balance in the allowance for doubtful accounts. The data collected from Mel's Hardware is as follows. A/R: $49,477.00 Allowance for doubtful accounts: debit $350.00 Credit sales: $144,554.00 Bad Debt Expense: -0-

Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is...

Ervin Company uses the allowance method to account for uncollectible accounts receivable. Bad debt expense is established as a percentage of credit sales. For 2021, net credit sales totaled $5,400,000, and the estimated bad debt percentage is 1.50%. No previously written-off accounts receivable were reinstated during 2021. The allowance for uncollectible accounts had a credit balance of $51,000 at the beginning of 2021 and $44,500, after adjusting entries, at the end of 2021. Required: 1. What is bad debt expense for 2021...

1)Company XYZ had total credit sales of $1,235,000. Calculate bad debt expense assuming the company estimates...

1)Company XYZ had total credit sales of $1,235,000. Calculate bad debt expense assuming the company estimates bad debt at 1% of sales made during the year (using the income statement approach). Record the journal entry to record the bad debt estimation. Accounts Debit Credit [ Select ] ["Bad Debt Expense", "Accounts Receivable", "Allowance for Doubtful Accounts", "Cash"] ...

A taxpayer uses an allowance method (i.e., aging method) of calculating bad debt expense for purposes...

A taxpayer uses an allowance method (i.e., aging method) of calculating bad debt expense for purposes of the business' financial statements. For income tax purposes, she will also use the allowance method to calculate the bad debt deduction. True False Beth and Bob are married entrepreneurs. Beth has a start −up sole proprietorship in which she works long hours. This year the business generated $500,000 of revenues and $800,000 of deductible business expenses. Bob is a partner in a new...

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the...

Using the percentage-of-receivables method for recording bad debt expense, estimated uncollectible accounts are $55,000. If the balance of Allowance for Doubtful Accounts is $11,000 debit before adjustment, what is the balance after adjustment? A) $55,000 B) $11,000 C) $66,000 D) $44,000

Short answer The Company uses the balance sheet approach to estimate bad debt expense. Credit sales...

Short answer The Company uses the balance sheet approach to estimate bad debt expense. Credit sales for the period were $10 million. The beginning balance in the allowance for doubtful accounts was a credit balance of $44,300. During the year, $41,000 of receivables were written off. The aging schedule suggests that the ending balance in the allowance for doubtful accounts is $51,500. What was bad debt expense for the period? Credit sales were $950,000. Cash flow from operating activities was...

Jake Company records bad debt expense using the net credit sales method and has estimated that...

Jake Company records bad debt expense using the net credit sales method and has estimated that 5.5% of its credit sales will prove to be uncollectible. During 2019, Jake Company reported net credit sales of $120,000 and collected $150,000 cash from its credit customers. The $150,000 includes a $6,000 recovery of an account receivable written off in the previous year. During 2019, Jake Company wrote-off as uncollectible accounts receivable of $4,000. Jake Company reported accounts receivable at January 1, 2019...

Question