Question

The A.T. Cross Company is well known for its Cross pens. The company recently reported the following amounts in its unadjusted trial balance as of December 31.

	Debits		Credits
Accounts Receivable	$	30,691,000
Allowance for Doubtful Accounts			$	952,000
Sales Revenue				158,312,000

Required:

1. & 2.	Prepare the adjusting journal entry required at December 31 for recording Bad Debt Expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
	(i) Assume Cross uses ¼ of 1 percent of sales to estimate its bad debt expense for the year.
	TIP: The percentage of credit sales method directly calculates Bad Debt Expense.
	(ii) Assume instead that Cross uses the aging of accounts receivable method and estimates that $1,007,000 of Accounts Receivable will be uncollectible.
	TIP: The aging of accounts receivable method focuses on calculating what the adjusted Allowance for Doubtful Accounts balance should be. You need to consider the existing balance when determining the adjustment. (1)Record the entry for bad debt expenses under the percentage of credit sales method (2)Record the entry for bad debt expenses under the aging of accounts receivable method. (3)Assume instead that Cross uses the aging of accounts receivable method and estimates that $1,007,000 of Accounts Receivable will be uncollectible and unadjusted balance in Cross’s Allowance for Doubtful Accounts at December 31 was a debit balance of $10,050. Prepare the adjusting journal entry required at December 31 for recording bad debt expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) (3)Record the adjusting entry for bad debts as of december 31, using the aging of accounts receivable method (4)If one of Cross’s main customers declared bankruptcy, what journal entry would be used to write off its $10,000 balance? (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) (4) Record the write-off of a $10,000 customer account, which is not collectible due to bankruptcy.

Answer 1

JOURNAL ENTRIES
DATE	ACCOUNTS TITLE AND EXPLANATIONS					DEBIT $	CREDIT $
CASE-1	Bad Debts expense Dr. (158312,000*0.75%)					1,187,340
	Allowance for uncollectibles Accounts						1,187,340
CASE-2	Bad debts expense Dr.					55000
	Allowance for uncollectible Accounts						55000
Note: Allowance required to created:
Uncollectibles estimated				1,007,000
Less: Allowance beginning balance				952,000
Allowance balance to be created				55,000
Case-3	Bad debts expense Dr.					1,017,050
	Allowance for uncollectible Accounts						1,017,050
Note: Allowance required to created:
Uncollectibles estimated				1,007,000
Add: Debit balance of Allowance				10,050
Allowance balance to be created				1,017,050
Case-4	Allowance for uncollectibles Accounts					10,000
	Accounts recievable						10,000