Question

Rogala Foods Inc. was formed in 2015 with the merger of Grouch Mayer and Tashamo Corporation. The company reported the following rounded amounts for the year ended January 3, 2016 (all amounts in millions): 

	Debits	Credits
Accounts Receivable	$1,100
Allowance for Doubtful Accounts		$ 28
Sales (assume all on credit)		18, 100

 Required:

 1. Assume Rogala uses 1/2 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.

 2. Assume instead Rogala uses the aging of accounts receivable method and estimates that $71 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense.

 3. Assume instead that Rogala's uses the aging of accounts receivable method and estimates that $71 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense assuming Rogala's unadjusted balance in Allowance for Doubtful Accounts at January 3, 2016 was a debit balance of $32.

 4. If one of Rogala's customers declared bankruptcy, what journal entry would be used to write off its $20 balance?

Answer 1

1
		Debit	Credit
January 03,2016	Bad Debts expense	91		=18100*1%*1/2
	Allowance for Doubtful Debts		91
2
		Debit	Credit
January 03,2016	Bad Debts expense	43		=71-28
	Allowance for Doubtful Debts		43
3
		Debit	Credit
January 03,2016	Bad Debts expense	103		=71+32
	Allowance for Doubtful Debts		103
4
		Debit	Credit
1	Allowance for Doubtful Debts	20
	Accounts Receivable		20