Question

Instructions Prepare the necessary journal entries for Perez Computers. E7.7 (LO 3) (Recording Bad Debts) Duncan Company reports the following financial information before adjustments. Dr. Cr. $100,000 Accounts Receivable Allowance for Doubtful Accounts Sales Revenue (all on credit) Sales Returns and Allowances $ 2,000 900,000 50,000 Instructions Prepare the journal entry to record Bad Debt Expense assuming Duncan Company estimates bad debts at (a) 5% of accounts receivable and (b) 5% of accounts receivable but Allowance for Doubtful Accounts had a $1,500 debit balance. E7.8 (LO 3) (Recording Bad Debts) At the end of 2020, Aramis Company has accounts receivable of $800,000 and an allowance for doubtful accounts of $40,000. On January 16, 2021, Aramis Company determined that its receivable from Ramirez Company of $6,000 will not be collected, and management authorized its write-off. Instructions a. Prepare the journal entry for Aramis Company to write off the Ramirez receivable. b. What is the net amount expected to be collected of Aramis Company's accounts receivable before the write-off of the Ramirez receivable? c. What is the net amount expected to be collected of Aramis Company's accounts receivable after the write-off of the Ramirez receivable?

Answer 1

SOLUTION

E7.7

a. Estimated uncollectible amount = Accounts receivable * Estimated bad debts percentage

= $100,000 * 5% = 5,000

Bad debts expense = Estimated uncollectible amount - Allowance for doubtful accounts

= $5,000 - 2,000 = 3,000

Journal entry-

Accounts titles and Explanation	Debit ($)	Credit ($)
Bad debts expense	3,000
Allowance for doubtful accounts		3,000
(To record bad debt expense)

b. Estimated uncollectible amount = Accounts receivable * Estimated bad debts percentage

= $100,000 * 5% = 5,000

Bad debts expense = Estimated uncollectible amount + Allowance for doubtful accounts

= $5,000 + 1,500 = 6,500

Journal entry-

Accounts titles and Explanation	Debit ($)	Credit ($)
Bad debts expense	6,500
Allowance for doubtful accounts		6,500
(To record bad debt expense)

** Both the questions provided are independent to each other. As per HOMEWORKLIB RULES I have answered first question.