Question

Help Save & Exit Submit Check my work E6-21 (Algo) Recording, Reporting, and Evaluating a Bad Debt Estimate Using the Percentage of Credit Sales Method LO6-2. During the current year, Robby's Camera Shop had sales revenue of $157,000, of which $57,000 was on credit. At the start of the current year, Accounts Receivable showed a $19,000 debit balance and the Allowance for Doubtful Accounts showed a $1,800 credit balance. Collections of accounts receivable during the current year amounted to $60,000. Data during the current year follow: a. On December 31, an Account Receivable (J. Doe) of $1,800 from a prior year was determined to be uncollectible; therefore, it was written off immediately as a bad debt. b. On December 31, on the basis of experience, a decision was made to continue the accounting policy of basing estimated bad debt losses on 3.0 percent of credit sales for the year. Required: 1. Prepare the required journal entries for the two items on December 31, the end of the accounting period. 2. Show how the amounts related to Accounts receivable and Bad debt expense would be reported on the income statement and balance sheet for the current year. Disregard income tax considerations. Complete this question by entering your answers in the tabs below. Reg 1 Req ZA Req 2B Prepare the required lournal entries for the two items on December 31. the end of the accounting period. (If no entry is required for a < Prey 9 of 12 MacBook

Answer 1

Requirement 1:

Credit Date Dec. 31 Debit 1,800 Account titles Allowance for doubtful accounts Accounts receivable - J. Doe (To write off uncollectible) 1,800 / Credit Date Dec. 31 Debit 1,710 Account titles Bad debt expense (57,000x3%) Allowance for doubtful accounts (To record bad debt expense) 1,710

Requirement 2:

ROBBY'S CAMERA SHOP Partial Income Statement For the year ended December 31 Operating expense: Bad debt expense 1,710

Working note:

Beg. Bal. Sales on account Accounts Receivable (Gross) 19,000 60,000 Collections on account 57,000 1,800 Write off Allowance for doubtful accounts Write off 1,800 1800 Beg. Bal. 1,710 Bad debt expense End. Bal. 14,200 1,710 End. Bal.

Requirement 3:

ROBBY'S CAMERA SHOP Balance sheet As of December 31 Current assets: Accounts receivable (Gross) Less: Allowance for doubtful accounts Accounts receivable, net of allowance for doubtful accounts 14,200 1,710 12,490