Question

Serial Problem Business Solutions LO P1, P2 Santana Rey, owner of Business Solutions, realizes that she needs to begin accounting for bad debts expense. Assume that Business Solutions has total revenues of $62,000 during the first three months of 2020, and that the Accounts Receivable balance on March 31, 2020, is $22,067. Required: 1a. Prepare the adjusting entry to record bad debts expense, which are estimated to be 1% of total revenues on March 31, 2020. There is a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31. 1b. Prepare the adjusting entry to record bad debts expense, which are estimated to be 2% of accounts receivable on March 31, 2020. There is a zero unadjusted balance in the Allowance for Doubtful Accounts at March 31. 2. Assume that Business Solutions's Accounts Receivable balance at June 30, 2020, is $20,250 and that one account of $99 has been written off against the Allowance for Doubtful Accounts since March 31, 2020. If Rey uses the method in part 1b, what adjusting journal entry is made to recognize bad debts expense on June 30, 2020? Complete this question by entering your answers in the tabs below.

Answer 1

Ans la $62,000 $620 Total Revenue Estimated Allowance for Doubtful Accounts ($62000 x 1%] Journal Entry Date Account Title Mar 31 Bad Debt Expense Allowance for Doubtful Accounts (To record bade debt Expense) Credit Debit $620 $620 Ans 1b Account Receivable as on March 31, 2020 Estimated Allowance for Doubtful Accounts ($22067 x 2%] $22,067 $441 Journal Entry Date Mar 31 Account Title Bad Debt Expense Allowance for Doubtful Accounts (To record bade debt Expense) Debit Credit $441 $441 Ans 2 Account Receivable as on June 30, 2020 Estimated Allowance for Doubtful Accounts ($22067 x 2%] $20,250 $405 Balance in Allowance for Doubtful Accounts as on March 31, 2020 Less: Amount Written off Balance in Allowance for Doubtful Accounts as on June 31, 2020 $441 $99 $342 Desired balance in Allowance for doubtfull account as on June 30, 2020 Less: Balance before adjusting entry Bad Debt Expense Entry to be passed $405 -$342 $63 Journal Entry Date June 30 Account Title Bad Debt Expense Allowance for Doubtful Accounts (To record bade debt Expense) Debit Credit $63 $63