Question

Question 2 (16 marks) The following data are available for Husky Co. for 2020: Credit sales during 2020 $810,000 Allowance for doubtful accounts, January 1, 2020 19,000 Collection of accounts written off in prior years 1,000 Customer accounts written off as uncollectible during 2020 18,000 Accounts receivable, December 31, 2020 70,500 Husky Co. estimates and records bad debt expense monthly based on 2% of credit sales. Required: a) Calculate the December 31, 2020 balance of the allowance for doubtful accounts in the general ledger for Husky. 1 b) A final analysis is completed of the ending accounts receivable balance and it is determined that Husky's allowance for doubtful accounts balance should be $18,000 at December 31, 2020. Prepare the adjusting journal entry. c) Show how accounts receivable would be presented on the December 31, 2020 statement of financial position (titles and amounts, assuming no note disclosure). d) What is 2020 total bad debts expense for Husky Co.? I

Answer 1

a Dr Cr Accounts receivable -Bad debt written off Allowance for doubtful accounts 18,000 Beginning Bal. Bad debt expense -Allowance created (810000*2%) 19,000 16,200 Ending Bal. 17,200 35,200 $ $ 35,200 Ending balance = $17,200

Credit General Journal Date Account Titles and Explanation b 31-Dec Bad debt expense (18000-17200) Allowance for doubtful accounts (To record the shortfall of allowance for doubtful debts) Debit 800 800 The ending balance of allowance for doubtful accounts was 17,200.800 more of bad bebt expense need to be accounted to make it 18,000. с Current assets: Accounts receivable Less: Allowance for doubtful accounts $ $ 70,500 18,000 $ 52,500 d Total bad debt expense = 16200 + 800 = $17,000 Recovery of bad debt is not accounted in allowance for doubtful accounts. It is diectly added to net income. Bad debt written off is not the current year bad debt expense. It is the write off form the previously accounted provision for bad debt. Please give likes for the work. Thanks & Regards.