On its December 31, 2014 year end, Rainbow Appliances has $300,000 in Accounts Receivable. Historically, about 3% of year end Accounts Receivable end up going bad based upon the previous 3 years' actual average experience. 

a.Assuming Rainbow uses the Percentage of Accounts Receivable technique in estimating its Allowance for Bad Debts, prepare the adjusting entry required at December 31st 2014

  

b.Assume that in April of 2015 one of Rainbow's customers (Mr. Jones) goes into bankruptcy and reports that he cannot pay his $500 balance owing. Prepare the journal entry to reflect this event.

 

c.Assume now that Mr. Jones unexpectedly contacts Rainbow in June 2015 wanting to pay $100 of his previously written off balance. Prepare the required journal entries to record this event.

QUESTION:

Holiday Stores Inc. purchased 600 Chocolate Bunnies for Easter on March 1st for a total cost of $2,400. The store sold 350 Bunnies prior to Easter for $5 each. After Easter the remaining bunnies could only be sold for $1.50 each due to a severe drop in demand. 

a) Prepare a journal entry to reflect that the current Sales Price had dropped to $1.50.

b) What is the balance in the Inventory ledger account after the journal entry?

Answer rating: 100% (QA)

a Adjusting entry required at December 31 2014 Account Debit Credit Allowance ... View the full answer