Question

N. No dividends are to be declared for 2018. 0. Management uses the percentage-of-receivables approach for estimating the percent of receivables that will become uncollectible. They have determined that allowance for doubtful accounts should represent 3.5% of the accounts receivable balance, initiating a 1% increase due to the economic circumstances of many of its customers. Adjustment should be made based on the adjusted accounts receivable balance. Note: 2018 Tax rate is 30%.

Answer 1

Books of Bust-a-Move Snowboard

Journal Entry of Point O

1. By Allowances for Doubtful Accounts $ 2,400

To Accounts Receivables $ 2,400

(Being provision made for doubtful account receivables, 2.5% of $ 96,000)

2. By Additional Allowances for Doubtful Accounts $ 936

To Accounts Receivables $ 936

(Being additional provision made for doubtful account receivables,1% of $ 93,600 ($ 96,000-$ 2,400))