Question

                         Name________________________________

The December 31, 2016 balance sheet of Benson Company had Accounts Receivable of $450,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During 2017, the following transactions occurred:

Sales on account $1,600,000

Sales returns and allowances, $75,000

Collections from customers, $1,450,000

Accounts written off $35,000

Previously written off accounts of $6,000 were collected

       (a) Journalize the 2017 transactions. Disregard any impact on inventory. (6 points)

Date	Account Titles	Debit	Credit

(b)   If Benson uses the percentage of sales basis to estimate bad debts expense and anticipates 2% of the 2017 net sales to be uncollectible, what is the adjusting entry at December 31, 2017? (2 points)

Date	Account Titles	Debit	Credit

(c)   If the Benson uses the percentage of receivables basis to estimate bad debts expense and determines that uncollectible accounts are expected to be 4% of the 2017 year-end balance in accounts receivable, what is the adjusting entry at December 31, 2017? Use the T accounts forms provided below for your analysis. (2 points)

Date	Account Titles	Debit	Credit

Accounts Receivable (T-Chart Below)

Allowance for Doubtful Accounts (T-chart below)

Answer 1

Answer

(a) Journalize the 2016 transactions:

Date	Particulars	Dr	Cr
	Accounts Receivable	$1,600,000
	Sales Revenue		$1,600,000
	(To record credit sales)
	Sales Returns and Allowances	$75,000
	Accounts Receivable		$75,000
	(To record credits to customers)
	Cash	$1,450,000
	Accounts Receivable
	(To record collection of receivables)
	Allowance for Doubtful Accounts	$35,000
	Accounts Receivable		$35,000
	(To write off specific accounts)
	Accounts Receivable	$33,000
	Allowance for Doubtful Accounts		$33,000
	(To reverse write-off of account)
	Cash	$6,000
	Accounts Receivable		$6,000
	(To record collection of account)

B.

Percentage-of-sales basis:

Sales revenue	$1,600,000
Less: Sales Returns and Allowances	$75,000
Net Sales	$1,525,000
Bad debt percentage	2%
Bad debt provision	30500

Dec. 31	Bad Debt Expense	$30500
	Allowance for Doubtful Accounts		$30500
	(Being record adjusting entry)

C.

ACCOUNTS RECEIVABLE:

$450,000	$75,000
$1,600,000	$1,450,000
$6,000	$35,000
	$6,000
	Bal.490000

ALLOWANCE FOR DOUBTFUL ACCOUNTS :

$35,000	$33,000
Bal.4000	$6,000

Required balance ()=$490000*0.04 =$19600

Balance before adjustment =$6000

Adjustment required =$13600

Adjusted entry:

Dec. 31	Bad Debt Expense	$13600
	Allowance for Doubtful Accounts		$13600
	(Being record adjusting entry)