Question

Majestic Equipment Sales Company, which sells only on account, had a $136,000 balance in its Accounts Receivable and a $5,700 credit balance in its Allowance for Doubtful Accounts on December 31, 2019. During 2020, the company's sales of equipment were $836,000 and its total cash collections from customers were $791,000. During the year, the company concluded that customers with accounts totalling $6,500 would be unable to pay, and wrote these receivables off. However, one of these customers subsequently made a payment of $850. (Note that this amount is not included in the cash collections noted above.) At the end of 2020, management decided that it would use an estimate for bad debts of 1% of its credit sales.

Prepare the journal entries to record all the 2020 transactions, including the adjustment for bad debts expense at year end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Enter an account title. Enter a debit balance. Enter a credit balance. Enter an account title. Enter a debit balance. Enter a credit balance. (To record sales) Enter an account title. Enter a debit balance. Enter a credit balance. Enter an account title. Enter a debit balance. Enter a credit balance. (To record cash collected from customers) Enter an account title. Enter a debit balance. Enter a credit balance. Enter an account title. Enter a debit balance. Enter a credit balance. (To write off accounts receivable) Enter an account title. Enter a debit balance. Enter a credit balance. Enter an account title. Enter a debit balance. Enter a credit balance. (To reinstate an account that were previously written off) Enter an account title. Enter a debit balance. Enter a credit balance. Enter an account title. Enter a debit balance. Enter a credit balance. (To record recovery of account that were previously written off) Enter an account title. Enter a debit balance. Enter a credit balance. Enter an account title. Enter a debit balance. Enter a credit balance. (To recognize the bad debts expense)

Show how the accounts receivable section of the statement of financial position at December 31, 2020, would be presented. Majestic Equipment Sales Company Statements of Financial Position (Partial) Choose the accounting period. As at December 31, 2020For the Month Ended December 31, 2020For the Year Ended December 31, 2020 Enter the opening section name. $Enter a dollar amount. Select between addition and deduction. LessAdd : Enter an statement item. Enter a dollar amount. Accounts receivable, net $Enter the total closing amount.

What amount of bad debts expense would appear in the statement of income for the year ended December 31, 2020? Bad debts expense for year $Enter a dollar amount.

Answer 1

Prepare the journal entries to record all the 2020 transactions, including the adjustment for bad debts expense at year end. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit Account receivable 836000 Sales revenue 836000 (To record sales) Cash 791000 Account receivable 791000 (To record cash collected from customers) Allowance for doubtful accounts 6500 Account receivable 6500 (To write off accounts receivable) Account receivable 850 Allowance for doubtful accounts 850 (To reinstate an account that were previously written off) Cash 850 Account receivable 850 (To record recovery of account that were previously written off) Bad debt expense 8360 Allowance for doubtful accounts 8360 (To recognize the bad debts expense)

Show how the accounts receivable section of the statement of financial position at December 31, 2020, would be presented. Majestic Equipment Sales Company Statements of Financial Position (Partial) Choose the accounting period. For the Year Ended December 31, 2020 Account receivable 136000 Less: Allowance for doubtful accounts -8410 Accounts receivable, net $127590.

What amount of bad debts expense would appear in the statement of income for the year ended December 31, 2020? Bad debts expense for year $8360