Question

Assume all of the same facts as in Part I, except that Soccer Inc. uses the percent of receivables or "aging of receivables" method to determine bad debt expense. I will repeat the facts for your convenience: Soccer Inc. had credit sales of $775,000 during 2020. At the end of 2020, the unadjusted ending balance in Soccer’s Allowance for Bad Debt account was $7,600, and the unadjusted balance in its gross accounts receivable account was $239,000. The company has a policy of writing-off any Account Receivable which is outstanding more than 75 days. As of 12/31/20, Soccer has Accounts Receivable balances totaling $2,000 outstanding over 75 days which need to be written off.

Soccer has created the following aging schedule:

Age of Receivables	Gross Receivables	Probability of Collection
0 – 15 days	$100,000	99%
16 – 45 days	$75,000	97%
46 – 60 days	$25,000	90%
61 – 75 days	$37,000	75%
76 days and Over	$2,000	0%

You may round your answers to the nearest dollar.

(A) What journal entry would Soccer record to "Write-Off" Accounts Receivable?

(B) What journal entry would Soccer record to recognize 2020 Bad Debt Expense?

(C) What is the adjusted 12/31/2020 balance of Soccer's Gross Accounts Receivable? **(Show calculation)**

(D) What is the adjusted 12/31/2020 balance of Soccer's Allowance for Bad Debt? **(Show calculation)**

(E) What is the adjusted 12/31/2020 balance of Soccer's Net Accounts Receivable? **(Show calculation)**

Answer 1

Journal Entry
Sr. No.	Date	Particulars	Debit ($)	Credit ($)
A		Allowance for Bad debt A/c                   Dr.	2,000
		To Accounts Receivables		2,000
		(Being Accounts receivables Written- off)
B		Bad Debt Expenses A/c *                         Dr.	15,000
		To Allowance for Bad debt A/c		15,000
* Bad Debt Expenses	=1,00,000X1% + 75,000X3% + 25,000X10%+37,000X25%
		15,000
C	Adjusted Balance of Soccer's Gross Accounts receivables (12/31/2020 )
	Unadjusted Balance	2,39,000
	Less:- Bad Debt Writen-off	2,000
	Adjusted Balance of Gross Accounts Receivables	2,37,000
D	Adjusted balance of Soccer's Allowance for Bad Debt (12/31/2020)
	Unadjusted ending balance	7,600
	Add;- Allowance for Bad Debt recorded	15,000
	Less:- Bad Debt Written off	2,000
	Adjusted ending balance of allowance for Bad debt	20,600
E	Adjusted balance of Soccer's Net Accounts Receivables (12/31/2020)
	Ajusted Gross Accounts receivables	2,37,000
	Less:- Adjusted Balance for Allowance for Bad debt	20,600
	Adjusted Net Accounts Receivables	2,16,400