A doubtful debt is an account receivable that may become bad debt at a point of time in future. A bad debt is an expense stating that a debt has become bad and is uncollectible. To Determine: Journal entry to record Liang’s 2015 and 2016 summarized transaction and its year end adjustment to record bad debts expense.

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Chapter 7, Problem 4PSA

Summary Introduction

Introduction: A doubtful debt is an account receivable that may become bad debt at a point of time in future. A bad debt is an expense stating that a debt has become bad and is uncollectible.

To Determine: Journal entry to record Liang’s 2015 and 2016 summarized transaction and its year end adjustment to record bad debts expense.

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Liang Company began operations on January 1, 2014. During its first two years, the company completed a number of transactions involving sales on credit, accounts receivable collections, and bad debts. These transactions are summarized as follows. 2014 a. Sold $1,351,900 of merchandise (that had cost $978,700) on credit, terms n/30. b. Wrote off $18,200 of uncollectible accounts receivable. c. Received $666,100 cash in payment of accounts receivable. d. In adjusting the accounts on December 31, the company estimated that 3.10% of accounts receivable will be uncollectible. 2015 e. Sold $1,563,700 of merchandise (that had cost $1,310,900) on credit, terms n/30. f. Wrote off $28,900 of uncollectible accounts receivable. g. Received $1,248,800 cash in payment of accounts receivable. h. In adjusting the accounts on December 31, the company estimated that 3.10% of accounts receivable will be uncollectible. Required: Prepare journal entries to…

Accounts Receivable $67,000 Allowance for Doubtful Accounts 1,300 (credit) During 2016, sales on credit amounted to $582,000, $552,800 was collected on outstanding receivables and $2,600 of receivables were written off as uncollectible. On December 31, 2016, Shelton estimates its bad debts to be 4% of the outstanding gross accounts receivable balance. Required: 1. Prepare the journal entry necessary to record Shelton’s estimate of bad debt expense for 2016. 2. Prepare the Accounts Receivable section of Shelton’s December 31, 2016, balance sheet. 3. Compute Shelton’s receivables turnover. (Round to one decimal place.) 4. If Sheldon uses IFRS, what might be the heading for the accounts receivable section in Requirement 2?

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