Question

Required information The following information applies to the questions displayed below.] Suzuki Supply reports the following amounts at the end of 2021 (before adjustment). 3 Credit Sales for 2021 $260,000 55,000 1,100 (Credit Accounts Receivable, December 31, 2021 Allovance for Uncollectible Accounts, December 31, 2021 Required: 1. Record the adjusting entry for uncollectible accounts using the percentage-of-receivables method. Suzuki estimates 12 % of recelvables will not be collected. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet > Record the adjusting entry for Uncollectible Accounts. Note: Enter debits before credits. Date General Journal Debit Credit December 31, 2021

Answer 1

Ans:- It is given in the question The company has credit sales for the year 2012 is $26000 and account receivables as on Dec 31st, 2018 is given $55000. The credit balance of allowance for an uncollectible account is given $1100 as of Dec 20121.

(1) In this part, we need to record the journal entry for uncollected accounts using the percentage of receivables method. Through this method, the uncollectible account is calculated as a percentage of the total accounts which cant be expected to recover in the future i.e bad debt. It is given that 12% of the receivables are not expected to be collected.

Therefore the uncollectible accounts are 55000 * 12% = $6600. It is also given the credit balance of $1100.

Therefore the estimated bad debts will be 6600 - 1100 = $5500.

Date	Particulars	Ref	Debit	Credit
Dec 31,2021	Bad expense A/C		5500
	To Allowance for doubtful or uncollectible accounts			5500

(2) Percentage of credit-sales method:- Through this method, uncollectible accounts are calculated as a percentage of the current year credit sales which are not expected to be recovered in the future. Bad debts for credit sales percentage is given 3%.

Therefore the uncollectible account will be 260000 * 3% = $7800.In this method, the credit balance will not be adjusted.

Date	Particulars	Ref	Debit	credit
Dec 31,2021	Bad debt expense A/C		7800
	To Allowance for doubtful or uncollectible account			7800

(3) Effects on net income before taxes for each method.

Percentage of receivables method:- In this method net income and total assets will be reduced by $5500 if 12% of receivables are expected to be not collected.

Percentage of credit sales method:- Through this method net income and total assets will be reduced by $7800 if 3% of credit sales are expected to be not collected.

Therefore the adjustment amount is more in the 1st method as compared to second.

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