The ledger of Costello Company at the end of the current year shows Accounts Receivable $110,000,...
The ledger of Costello Company at the end of the current year shows Accounts Receivable $110,000, Sales Revenue $840,000, and Sales Returns and Allowances $20,000. Instructions
(a) If Costello uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Costello determines that L. Dole’s $1,400 balance is uncollectible.
(b) If Allowance for Doubtful Accounts has a credit balance of $2,100 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 1% of net sales, and (2) 10% of accounts receivable.
(c) If Allowance for Doubtful Accounts has a debit balance of $200 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be (1) 0.75% of net sales and (2) 6% of accounts receivable.
Homework Answers
a) Journal entry
| Date | account and explanation | Debit | Credit |
| Bad debt expense | 1400 | ||
| Account receivable | 1400 |
b) Journal entry
| No | General Journal | Debit | Credit |
| 1) | Bad debt expense (820000*1%) | 8200 | |
| Allowance for doubtful accounts | 8200 | ||
| 2 | Bad debt expense (11000-2100) | 8900 | |
| Allowance for doubtful accounts | 8900 | ||
c) Journal entry
| No | General Journal | Debit | Credit |
| 1) | Bad debt expense (820000*0.75%) | 6150 | |
| Allowance for doubtful accounts | 6150 | ||
| 2 | Bad debt expense (110000*6%+200) | 6800 | |
| Allowance for doubtful accounts | 6800 | ||
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