Question

The Calvada Company makes all of its sales on account. For 2019. Calvada reported beginning balances in Accounts Receivable and Allowance for Uncollectible Accounts of $220,000 and $14,000, respectively. Calvada wrote off accounts of $30,000 as uncollectible during the year, and the ending balance in Accounts Receivable was $260,000. Net sales for 2019 totaled $2,100,000 Required: A. Prepare the entry to record the uncollectible accounts expense for the year if Calvada estimates the expense as 2.5% of sales. B. Prepare the entry to record the uncollectible accounts expense for the year if Calvada estimates that 5% of outstanding gross receivables at the end of the year will not be collected. C. How much cash did Calvada collect from its customers in 2019?

Answer 1

Solution a:

Journal Entries - Calvada Company
Event	Particulars	Debit	Credit
1	Bad debts expense Dr ($2,100,000*2.50%)	$52,500.00
	To Allowance for doubtful accounts		$52,500.00
	(To record bad debts expenses)

Solution b:

Journal Entries - Calvada Company
Event	Particulars	Debit	Credit
1	Bad debts expense Dr ($260,000*5% + $16,000)	$29,000.00
	To Allowance for doubtful accounts		$29,000.00
	(To record bad debts expenses)

Solution c:

Calvada collect from customer in 2019 = Beginning receivables + Net sales - Write off - Ending accounts receivables

= $220,000 + $2,100,000 - $30,000 - $260,000

= $2,030,000