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Brown Cow Dairy uses the aging approach to estimate bad debt expense. The ending balance of each account receivable is aged o
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Answer #1

Required 1:

Answer:

Journal entry:

No. Date General Journal Debit Credit
1 Dec-31 Allowance for doubtful accounts 620
Accounts receivable (Patty's Bake Shop) 620
(Write off accounts receivable)
2 Dec-31 Bad debt expense 1,380
Allowance for doubtful accounts 1,380
(Entry for allowance of doubtful account)

Calculation:

To adjust for estimated bad debt expense for current year computed as follows:

Aged Accounts Receivable Estimated Percentage Uncollectible Estimated Amount Uncollectible
Not yet due 11,000 4% 440
Up to 120 days past due 4,000 14% 560
Over 120 days past due 3,500 30% 1,050
Estimated balance in allowance for Doubtful Accounts 2,050
Current balance in allowance for Doubtful Accounts 670
Bad Debt Expense for the year 1,380

Required 2a:

Answer:

BROWN COW DAIRY COMPANY
Income Statement (Partial)
As of December 31
Operating expenses:
Bad debt expense                  1,380

Required 2b:

Answer:

BROWN COW DAIRY COMPANY
Balance Sheet (Partial)
As of December 31
Current assets:
Accounts receivable (Patty's Bake Shop)               18,500
(Less)Allowance for doubtful accounts                  2,050
Accounts receivable, net of allowance for doubtful accounts               16,450

Calculation:

Accounts receivable = 11,000+4000+3500 = 18,500

Allowance for doubtful accounts = 440+560+1,050 = 2,050

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