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Uncollectible Accounts—Percentage of Sales and Percentage of Receivables

At the completion of the current fiscal year ending December 31, the balance of Accounts Receivable for Yang's Gift Shop was $31,660. Credit sales for the year were $344,800.

Required:

Make the necessary adjusting entry in general journal form under each of the following assumptions. Show calculations for the amount of each adjustment and the resulting net realizable value.

1. Allowance for Doubtful Accounts has a credit balance of $335.

a. The percentage of sales method is used and bad debt expense is estimated to be 2% of credit sales. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31	Bad Debt Expense					1
2		Allowance for Doubtful Accounts					2
3							3

Accounts receivable, December 31, 20--	$
Less allowance for doubtful accounts
Net realizable value	$

b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $7,090 in uncollectible accounts. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20--Dec. 31	Bad Debt Expense					1
2		Allowance for Doubtful Accounts					2
3							3

Accounts receivable, December 31, 20--	$
Less allowance for doubtful accounts
Net realizable value	$

2. Allowance for Doubtful Accounts has a debit balance of $420.

a. The percentage of sales method is used and bad debt expense is estimated to be 1.5% of credit sales. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20--Dec. 31						1
2							2
3							3

Accounts receivable, December 31, 20--	$
Less allowance for doubtful accounts
Net realizable value	$

b. The percentage of receivables method is used and an analysis of the accounts produces an estimate of $5,675 in uncollectible accounts. If an amount box does not require an entry, leave it blank.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Dec. 31						1
2							2
3							3

Accounts receivable, December 31, 20--	$
Less allowance for doubtful accounts
Net realizable value	$

Answer 1

1)

a)Under % of sales method ,bad debt expense is recorded at gross amount (irrespective of balance in allowance account ,unadjusted)

Date	Account	Debit	credit
december 31	Bad debt expense	6896
	Allowance for Doubtful Accounts (344800*.02]		6896

Accounts receivable december 31	31660
less:allowance for doubtful accounts(6896+335)	(7231)
Net realizable value	24429

b)under % of receivable method,bad debt expense is recorded at net amount (Amount % of receivables - balance in allowance account)

Date	Account	debit	credit
Dec 31	Bad debt expense	6755
	Allowance for Doubtful Accounts		6755
	[being bad debt expense recorded 7090-335]

Accounts receivable, December 31, 20	31660
Less:allowance for doubtful accounts	(7090)
Net realizable value	24570

2a)

Date	Account	Debit	credit
dec 31	Bad debt expense	5172
	Allowance for doubtful account (344800*1.5%)		5172

Accounts receivable	31660
Less allowance for doubtful accounts (5172-420)	(4752)
Net realizable value	26908

b)

date	Account title	Debit	credit
dec 31	Bad debt expense	6095
	allowance for doubtful accounts (5675+420debit balance)		6095

Accounts receivable	31660
less:allowance for doubtful accounts	(5675)
Net realizable value	25985