BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

Solutions

Chapter
Section
BuyFindarrow_forward

Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
342 views

Bad Debt Expense: Percentage of Credit Sales Method

Gilmore Electronics had the following data for a recent year:

Cash sales $135,000

Credit sales 512,000

Accounts receivable determined to be uncollectible 9,650

The firm’s estimated rate for bad debts is 2.2% of credit sales.

Required:

1. Prepare the journal entry to write off the uncollectible accounts.

2. Prepare the journal entry to record the estimate of bad debt expense.

3. If Gilmore had written off $3,000 of receivables as uncollectible during the year, how much would bad debt expense reported on the income statement have changed?

4. CONCEPTUAL CONNECTION If Gilmore’s estimate of bad debts is correct (2.2% of credit sales) and the gross margin is 20%, by how much did Gilmore’s income from operations increase assuming $150,000 of the sales would have been lost if credit sales were not offered?

To determine

(a)

Credit Sales Method:

The method named percentage of credit sales method is the method in which the bad debts are computed on the basis of percentage of sales.

The journal entry for recording the write-off of the uncollectible accounts.

Explanation

The Gilmore Electronics has cash sales of $1,35,000 and credit sales of $5,12,000. The estimation of default is 2.2% at the year end and a default of $9,650 occurs related to past year

To determine

(b)

Credit Sales Method:

The method named percentage of credit sales method is the method in which the bad debts are computed on the basis of percentage of sales.

The adjusting journal entry for the bad debt expense.

To determine

(c)

Credit Sales Method:

The method named percentage of credit sales method is the method in which the bad debts are computed on the basis of percentage of sales.

The effect of bad debt expense of $3,000 during the year on the income statement.

To determine

(d)

Credit Sales Method:

The method named percentage of credit sales method is the method in which the bad debts are computed on the basis of percentage of sales.

To calculate:

The increase in the income from the sales due to providing the credit sales.

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
Ch-5 P-11DQCh-5 P-12DQCh-5 P-13DQCh-5 P-14DQCh-5 P-15DQCh-5 P-16DQCh-5 P-17DQCh-5 P-18DQCh-5 P-19DQCh-5 P-20DQCh-5 P-21DQCh-5 P-22DQCh-5 P-23DQCh-5 P-1MCQCh-5 P-2MCQCh-5 P-3MCQCh-5 P-4MCQCh-5 P-5MCQCh-5 P-6MCQCh-5 P-7MCQCh-5 P-8MCQCh-5 P-9MCQCh-5 P-10MCQCh-5 P-11MCQCh-5 P-12MCQCh-5 P-13MCQCh-5 P-14MCQCh-5 P-15MCQCh-5 P-16MCQCh-5 P-17MCQCh-5 P-18MCQCh-5 P-19MCQCh-5 P-20MCQCh-5 P-21CECh-5 P-22CECh-5 P-23CECh-5 P-24CECh-5 P-25CECh-5 P-26CECh-5 P-27CECh-5 P-28CECh-5 P-29CECh-5 P-30CECh-5 P-31CECh-5 P-32CECh-5 P-33CECh-5 P-34CECh-5 P-35CECh-5 P-36CECh-5 P-37CECh-5 P-38CECh-5 P-39BECh-5 P-40BECh-5 P-41BECh-5 P-42BECh-5 P-43BECh-5 P-44BECh-5 P-45BECh-5 P-46BECh-5 P-47BECh-5 P-48BECh-5 P-49BECh-5 P-50BECh-5 P-51BECh-5 P-52BECh-5 P-53BECh-5 P-54BECh-5 P-55BECh-5 P-56BECh-5 P-57BECh-5 P-58BECh-5 P-59BECh-5 P-60ECh-5 P-61ECh-5 P-62ECh-5 P-63ECh-5 P-64ECh-5 P-65ECh-5 P-66ECh-5 P-67ECh-5 P-68ECh-5 P-69ECh-5 P-70ECh-5 P-71ECh-5 P-72ECh-5 P-73ECh-5 P-74ECh-5 P-75ECh-5 P-76ECh-5 P-77ECh-5 P-78ECh-5 P-79APSACh-5 P-80APSACh-5 P-81APSACh-5 P-82APSACh-5 P-83APSACh-5 P-84APSACh-5 P-85APSACh-5 P-86APSACh-5 P-87APSACh-5 P-88APSACh-5 P-79BPSBCh-5 P-80BPSBCh-5 P-81BPSBCh-5 P-82BPSBCh-5 P-83BPSBCh-5 P-84BPSBCh-5 P-85BPSBCh-5 P-86BPSBCh-5 P-87BPSBCh-5 P-88BPSBCh-5 P-89.1CCh-5 P-89.2CCh-5 P-89.3CCh-5 P-90.1CCh-5 P-90.2CCh-5 P-90.3CCh-5 P-91CCh-5 P-92.1CCh-5 P-92.2CCh-5 P-93.1CCh-5 P-93.2CCh-5 P-94.1CCh-5 P-94.2CCh-5 P-95.1CCh-5 P-95.2CCh-5 P-95.3CCh-5 P-95.4CCh-5 P-95.5CCh-5 P-95.6CCh-5 P-95.7CCh-5 P-96.1CCh-5 P-96.2CCh-5 P-96.3CCh-5 P-96.4CCh-5 P-96.5CCh-5 P-96.6CCh-5 P-97.1CCh-5 P-97.2C

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the two main causes of market failure? Give an example of each.

Principles of Microeconomics (MindTap Course List)

How would you model Question 6 with an OODM? (Use Figure 2.4 as your guide.)

Database Systems: Design, Implementation, & Management

What is a relational diagram? Give an example.

Database Systems: Design, Implementation, & Management

For Problems 16.1 through 16.19, draw the top, the front, and the right-side orthographic views of the objects ...

Engineering Fundamentals: An Introduction to Engineering (MindTap Course List)

List five surface grinder safety guidelines.

Precision Machining Technology (MindTap Course List)

What is a managerial control?

Management Of Information Security

Define an object, and provide three examples.

Systems Analysis and Design (Shelly Cashman Series) (MindTap Course List)

Find the forces Q1,Q2, and Q3 so that the two forces systems are equivalent.

International Edition---engineering Mechanics: Statics, 4th Edition

What types of objects might contain an NFC tag?

Enhanced Discovering Computers 2017 (Shelly Cashman Series) (MindTap Course List)