Question

The following information has been obtained about Elzevir Inc. (Elzevir) for 2017. The information was obtained before any year-end adjusting entries were made.
Elzevir's year-end is March 31:
Accounts receivable on March 31, 2017.............. $1,575,000
Credit sales for the year ended March 31, 2017............. 9,361,500
Allowance for uncollectible accounts on March 31, 2017 (credit balance).. 11,250

Required:
a. Calculate the bad debt expense that Elzevir would record for the 2017 fiscal year, assuming that management expects that 6 percent of year-end accounts receivable won't be collected. What would be the balance in allowance for uncollectible accounts on March 31, 2017 (after the adjusting entry is recorded)? Prepare the journal entry to record the bad debt expense.
b. Calculate the bad debt expense that Elzevir would record for the 2017 fiscal year, assuming that management expects that 1.5 percent of credit sales during fiscal 2017 won't be collected. What would be the balance in allowance for uncollectible accounts on March 31, 2017 (after the adjusting entry is recorded)? Prepare the journal entry to record the bad debt expense.
c. What would your answers in (a) and (b) be if the balance in allowance for uncollectible accounts on March 31, 2017 (before any year-end adjusting entries) was a debit of $11,250? Explain any differences you find.



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  • CreatedFebruary 26, 2015
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