Question

blemi II (10 points): The Bolton Sign Company uses the allowance method in accounting for uncollectible s. Past experience indicates that 4.5% of accounts receivable will eventually be uncollectible. Selected want balances at December 31, 2017, and December 31, 2018, appear below: 12/31/2017 12/31/2018 Net Credit Sales S400,000 $500,000 Accounts Receivable 80,000 100,000 Allowance for Doubtful Accounts 3,600 Instructions: (a) Record the following events in 2018. Aug, 10 Determined that the account of Jane Duncan for $500 is uncollectible. Sept. 12 Determined that the account of Jeff Lynch for $3,000 is uncollectible. Oct. 10 Received a check for $500 as payment on account from Jane Duncan, whose account had previously been written off as uncollectible. (b) Prepare the adjusting journal entry to record the bad debt provision for the year ended December 31, 2018 (c) What is the balance of Allowance for Doubtful Accounts at December 31, 2018? Dr. Cr. (a) Date Account Title

Answer 1

Answer a .

(a)	Date	Accounts Titles		Debit	Credit
(1)	Aug.10	Allowance for Doubtful Accounts		500
		Accounts receivable - Jane Duncun			500
		(To record uncollectible.)
(2)	Sept 12	Allowance for Doubtful Accounts		3,000
		Accounts receivable - Jeff Lynch			3,000
		(To record uncollectible.)
(3)	Oct 10	Cash		500
		Allowance for Doubtful Accounts			500
		(To record received check on account of Jane Duncun)

Answer b .

Date	Accounts Titles	Debit	Credit
Dec . 31 2018	Bad Debt Expense [(100,000 * 4.5 %) - (3,600 - 500 - 3,000 + 500)	3,900
	Allowance for Doubtful Accounts		3,900
	(To record bad debt provision)

Answer c.

Balance of Allowance for Doubtful Accounts at December 31, 2018 :

Accounts Receivable as on December 31, 2018 * 4.5 %

= $100,000 * 4.5 % = $4,500