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9 August, 01:34

Exercise 8-5 The ledger of Costello Company at the end of the current year shows Accounts Receivable $110,000; Sales Revenue $840,000; and Sales Returns and Allowances $20,000. Prepare journal entries for each separate scenario below. (a) If Costello Company uses the direct write-off method to account for uncollectible accounts, journalize the entry at December 31, assuming Costello Company determines that L. Dole's $1,400 balance is uncollectible. (b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming uncollectible accounts are estimated to be 10% of accounts receivable. (c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming uncollectible accounts are estimated to be 6% of accounts receivable.

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  1. 9 August, 02:01
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    Journal entries are shown below:

    Explanation:

    The journal entries are as follows

    a. Bad debt expense $1,400

    To Account receivable $1,400

    (Being the bad debt expense is recorded)

    b. Bad debt expense $8,900

    To Allowance for doubtful accounts $8,900

    (Being the bad debt expense is recorded)

    The computation is shown below:

    = $110,000 * 10% - $2,100

    = $11,000 - $2,100

    = $8,900

    c. Bad debt expense $6,800

    To Allowance for doubtful accounts $6,800

    (Being the bad debt expense is recorded)

    The computation is shown below:

    = $110,000 * 6% + $200

    = $6,600 + $200

    = $6,800
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