ed 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$26,191,000     Allowance for Doubtful Accounts    $943,000 Sales and Service Revenue     153,812,000   Required:Assume Red Hat uses 3/4 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.Assume instead that Red Hat uses the aging of accounts receivable method and estimates that $989,000 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.Assume that the unadjusted balance in Red Hat's Allowance for Doubtful Accounts at February 29 was a debit balance of $2,950,000. Red Hat uses the aging of accounts receivable method and estimates that $943,000 of Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at February 29 for recording bad debt expense.If one of Red Hat’s customers declared bankruptcy, what journal entry would be used to write off its $11,000,000 balance?

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Asked Mar 31, 2019
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ed 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 $ 26,191,000          
Allowance for Doubtful Accounts         $ 943,000  
Sales and Service Revenue           153,812,000  
 

 

Required:

  1. Assume Red Hat uses 3/4 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 $989,000 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 $2,950,000. Red Hat uses the aging of accounts receivable method and estimates that $943,000 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 Hat’s customers declared bankruptcy, what journal entry would be used to write off its $11,000,000 balance?

 

 

 

 

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Expert Answer

Step 1

1. Adjusting entry journal entry to record the bad debt expense.

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Step 2

2.  Adjusting journal entry to record the bad debts expense:

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Step 3

3. Adjusting journal entry to rec...

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