A retailer sells products through their stores, their CFO has requested your help in the following issue. The store offers credit to guests through proprietary credit cards. However, in October of the fiscal year, the general merchandise store decides to sell its credit card receivables portfolio to a bank for cash consideration equal to the gross par value of the outstanding receivables at the time of closing. Historically, at the fiscal year end of February, the credit card receivables are recorded at par value less an allowance of doubtful accounts. The retailer recognized an allowance for doubtful accounts and bad debt expenses using aging method. The bad debt expense is included in the selling general and administrative expense on consolidated statement of earning. Please see if further adjustments are needed: Change in Allowance for Doubtful Accounts Allowance at beginning of fiscal year 430,000 Bad debt expense 196,000 Write-offs (424,000) Recoveries 138000 Allowance at end of fiscal year 340000 Please show the journal entries necessary and the balance sheet adjustments needed to be made (the exact line item names and values). Explain all the steps and show each step necessary (including calculations)

Answer rating: 100% (QA)

To address this issue lets break down the necessary journal entries and balance sheet adjustments st... View the full answer