Question

My Turbolax® LOOI. Harvard Business Welcome to mapter 13 Help Save & Exit Check The Manda Panda Company uses the allowance method to account for bad debts. At the beginning of 2021, the allowance account had a credit balance of $90,600. Credit sales for 2021 totaled $2,630,000 and the year-end accounts receivable balance was $567,500. During this year, $87,000 in receivables were determined to be uncollectible, Manda Panda anticipates that 3% of all credit sales will ultimately become uncollectible. The fiscal year ends on December 31. ints Required: 1. Does this situation describe a loss contingency? 2. What is the bad debt expense that Manda Panda should report in its 2021 Income statement? 3. Prepare the appropriate journal entry to record the contingency 4. Complete the table below to calculate the net realizable value Manda Pande should report in its 2021 balance sheet. eBook Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Complete the table below to calculate the net realizable value Manda Panda should report in its 2021 balance sheet. Balance Sheet Accounts receivable $ 567,500 Allowance for uncollectible accounts Net realizable value < Prex 8 of 12 Next > Book Air

Answer 1

Answer to Requirement1: Yes, this situation describes a loss contingency. At the year end, there was significant possibility of bad debt of $78,900 ($2,630,000 * 3%), therefore the company should provide for this loss. Answerto Requirement 2: Bad Debt Expense = Estimated Uncollectible Bad Debt Expense = 3% * $2,630,000 Bad Debt Expense = $78,900 Answerto Requirement 3: Credit Date Dec. 31, 2021 General Journal Bad Debt Expense Allowance for Uncollectible Account Debit 78,900 78,900 Answerto Requirement 4: Accounts Receivable = $567,500 Allowance for Uncollectible Accounts = Beginning Balance + Bad Debt Expense Allowance for Uncollectible Accounts = $90,600 + $78,900 Allowance for Uncollectible Accounts = $169,500 Net Realizable Value = Accounts Receivable - Allowance for Uncollectible Accounts Net Realizable Value = $567,500 - $169,500 Net Realizable Value = $398,000