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16 January, 20:39

At December 31, Folgeys Coffee Company reports the following results for its calendar year. Cash sales $ 907,000 Credit sales 307,000 Its year-end unadjusted trial balance includes the following items. Accounts receivable $ 132,000 debit Allowance for doubtful accounts 5,700 debit Prepare the adjusting entry to record bad debts expense assuming uncollectibles are estimated to be (a) 6% of credit sales, (b) 4% of total sales and (c) 9% of year-end accounts receivable.

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  1. 16 January, 20:57
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    The journal entries are as follows:

    (a) 6% of credit sales,

    Bad debts expense A/c Dr. $18,420

    To Allowance for doubtful accounts $18,420

    (To record the bad debt expense)

    Workings:

    Bad debt expense:

    = 6% of credit sales

    = 0.06 * 307,000

    = $18,420

    (b) 4% of total sales,

    Bad debts expense A/c Dr. $48,560

    To Allowance for doubtful accounts $48,560

    (To record the bad debt expense)

    Workings:

    Bad debt expense:

    = 4% of Total sales

    = 0.04 * (307,000 + 907,000)

    = 0.04 * $1,214,000

    = $48,560

    (c) 9% of year-end accounts receivable,

    Bad debts expense A/c Dr. $17,580

    To Allowance for doubtful accounts $17,580

    (To record the bad debt expense)

    Workings:

    Bad debts expense:

    = 9% of year-end accounts receivable

    = (0.09 * $132,000) - $5,700

    = $11,880 + $5,700

    = $17,580
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