BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

UNCOLLECTIBLE ACCOUNTS—PERCENTAGE OF SALES Rossin’s Racers has total credit sales for the year of $280,000 and estimates that 3% of its credit sales will be uncollectible. Record the end-of-period adjusting entry on December 31, in general journal form, for the estimated bad debt expense. Assume the following independent conditions existed prior to the adjustment:

  1. 1. Allowance for Doubtful Accounts has al credit balance of $570.
  2. 2. Allowance for Doubtful Accounts has a debit balance of $360.

1.

To determine

Prepare the adjusting entry on December 31 to record the bad debt expense under each of the independent conditions.

Explanation

Bad debt expense:

Bad debt expense is an expense account. The amounts of loss incurred from extending credit to the customers are recorded as bad debt expense. In other words, the estimated uncollectible accounts receivable are known as bad debt expense.

Allowance method:

It is a method for accounting bad debt expense, where uncollectible accounts receivables are estimated and recorded at the end of particular period. Under this method, bad debts expenses are estimated and recorded prior to the occurrence of actual bad debt, in compliance with matching principle by using the allowance for doubtful account.

Percentage-of-sales basis:

It is a method of estimating the bad debts (loss on extending credit), by multiplying the expected percentage of uncollectible with the total amount of revenues for a specific period. Estimated bad debts would be treated as a bad debt expense of the particular period.

Prepare the adjusting entry on December 31 to record the bad debt expense:

DateParticularsDebitCredit
December 31Bad debt expense (1)$8,400 
    Allowance for doubtful accounts  $8,400
 (To record the adjusting entry of bad debts expense)  

Table (1)

Working note 1:

Calculate the bad debt expense...

2.

To determine

Prepare the adjusting entry on December 31 to record the bad debt expense under each of the independent conditions.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What is the function of a cash budget? A capital budget?

Foundations of Business (MindTap Course List)

SCENARIO ANALYSIS Huang Industries is considering a proposed project whose estimated NPV is 12 million. This es...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)