Red Hat, Inc., is a software development company that recently reported the following amounts in its unadjusted trial balance as of February 29, 2016.

	Debits				Credits
Accounts Receivable	$	35,191,000
Allowance for Doubtful Accounts					$	961,000
Sales and Service Revenue						162,812,000

Required:

1. Assume Red Hat uses 1/4 of 1 percent of revenue to estimate its bad debt expense for the year. Prepare the adjusting journal entry required at February 29 for recording Bad Debt Expense.

2. Assume instead that Red Hat uses the aging of accounts receivable method and estimates that $1,025,000 of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February 29 for recording bad debt expense. TIP: The aging of accounts receivable method focuses on calculating what the adjusted Allowance for Doubtful Accounts balance should be. You need to consider the existing balance when determining the adjustment.

3. Assume that the unadjusted balance in Red Hat's Allowance for Doubtful Accounts at February 29 was a debit balance of $1,950,000. Red Hat uses the aging of accounts receivable method and estimates that $961,000 of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February 29 for recording bad debt expense.

4. If one of Red Hats customers declared bankruptcy, what journal entry would be used to write off its $10,000,000 balance?

1. Assume Red Hat uses 1/4 of 1 percent of revenue to estimate its bad debt expense for the year. Prepare the adjusting journal entry required at February 29 for recording Bad Debt Expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

2. Assume instead that Red Hat uses the aging of accounts receivable method and estimates that $1,025,000 of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February 29 for recording bad debt expense. TIP: The aging of accounts receivable method focuses on calculating what the adjusted Allowance for Doubtful Accounts balance should be. You need to consider the existing balance when determining the adjustment. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

3. Assume that the unadjusted balance in Red Hat's Allowance for Doubtful Accounts at February 29 was a debit balance of $1,950,000. Red Hat uses the aging of accounts receivable method and estimates that $961,000 of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February 29 for recording bad debt expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

4. If one of Red Hats customers declared bankruptcy, what journal entry would be used to write off its $10,000,000 balance? (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Note: Enter debits before credits. Transaction General Journal Debit Credit Record entry Clear entry View general journal