Complete the following calculations and make the appropriate journal entries under each of section I, II, III,
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Complete the following calculations and make the appropriate journal entries under each of section I, II, III, and IV.
| I. Income statement approach to recording bad debt expense | ||||||
| Net credit sales | 2,500,000 | Net credit sales | 2,500,000 | |||
| Say 3% is the company's factor for bad debt | What if its a 2% factor | |||||
| What is the Journal Entry | What is the Journal Entry | |||||
| II. Balance sheet approach (aging) to record bad debt expense (See note below) | ||||||
| Total A/R | Current | 1-30 | 31-60 | 61-90 | >90 | |
| 565,000 | 325,000 | 124,000 | 65,000 | 32,000 | 19,000 | |
| Management's Estimate | 1% | 3% | 5% | 10% | 25% | |
| Total uncollectible | ||||||
| Necessary total allowance | (sum of all categories) | |||||
| What is the Journal Entry | ||||||
| Allowance account balance now | 6,850 | |||||
| Adjustment amount | ||||||
| What if allowance balance is 25,000? | 25,000 | What is the Journal Entry | ||||
| Adjustment amount | ||||||
| Total A/R | Current | 1-45 | 46-90 | >90 | ||
| 508,000 | 290,000 | 110,000 | 68,000 | 40,000 | ||
| Management's Estimate | 2% | 5% | 8% | 15% | ||
| Total uncollectible | ||||||
| Necessary total allowance | (sum of all categories) | |||||
| What is the Journal Entry | ||||||
| Allowance account balance now | 17,500 | |||||
| Adjustment amount | ||||||
| What is the Journal Entry | ||||||
| What if AFDA balance is 25,000? | 25,000 | |||||
| Adjustment amount | ||||||
| III. Record the Write - off of $25,000 receivable. | ||||||
| Journal Entry | ||||||
| IV. Record the entries for collecting the above write-off. | ||||||
| Journal Entry to restore | ||||||
| Journal Entry to collect | ||||||
Expert Answer:
SECTION I When the factor for bad debts is 3 Bad debts 3 sales 003 2 500 000 75 ... View the full answer
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