Question

Problem 85A Accounts receivable transactions and bad debt adjustments 01, 2, 3 CHECK AGURES: 2. Bad Debt Expense = $20,460,5. Bad Debt Expense = $7.200 Swiss Supplies showed the following selected adjusted balances at its December 31, 2019. yearend: Accounts Receivable Dec. 31/19 Balance Allowance for Doubtful Accounts 16,400 Dec. 31/19 Balance 490,000 During 2020, the following selected transactions occurred: 2. Sales totalled $2.800.000, of which 25% were cash sales (cost of sales $1.804,000). Sales returns were $108,000, half regarding credit sales. The returned merchandise was scrapped. c. An account for $24,000 was recovered. d. Several accounts were written off: $26.000 6. Collections from credit customers totalled $1.790,000 (excluding the recovery in (c) above). Part A Required 1. Journalize transactions (a) through (e). You may find it useful to post your entries to Taccounts for Accounts Receivable and Allowance for Doubtful Accounts Part B Required 2. Prepare the December 31, 2020, adjusting entry to estimate bad debts assuming that uncollectible accounts are estimated to be 1% of net credit sales 3. Show how accounts receivable will appear on the December 31, 2020, balance sheet. 4. What will bad debt expense be on the income statement for the year ended December 31, 2020? PortCindependent of Port ) Required 5. Prepare the December 31, 2020. adjusting entry to estimate bad debts assuming that uncollectible accounts are estimated to be 3% of outstanding receivables 6. Show how accounts receivable will appear on the December 31, 2020, balance sheet 7. What will bad debt expense be on the income statement for the year ended December 31, 20207

Answer 1

Note - We are allowed to answer only 4 subquestion if multiple questions asked.

1. Journal Entries -

Swiss Supplies Journal Entries Date Accounts Title Debit Credit a.1 Cash $ 700,000 Accounts Receivable $2,100,000 Sales Revenue $ 2,800,000 (Being Sales Revenue Earned 25% Cash and 75% Credit) a.2 Cost of Good Sold $1,804,000 Inventory (Being cost of Goods sold incurred) $1,804,000 b Sales Return & Allowance $ 108,000 Accounts Receivable Cash (Being Sales return booked) $ $ 54,000 54,000 c.1 Accounts Receivable $ 24,000 Allowance for Doubtful Accounts (Being Accounts receivable recovered) $ 24,000 c.2 Cash $ 24,000 Accounts Receivable (Being Cash Collected on accounts) $ 24,000 d Allowance for Doubtful Accoun$ 26,000 Accounts Receivable (Being Accounts receivable write off) $ 26,000 Cash $1,790,000 Accounts Receivable (Being Cash Collected on accounts) $1,790,000

2. Adjusting Entry -

Date Credit Swiss Supplies Adjusting Entry Accounts Title Debit Bad Debts $ 20,460 Allowance for Doubtful Accounts (Being Bad debts provided 1% on net sales) 2 $ 20,460

3. Balance Sheet -

Swiss Supplies Balance Sheet As on December 31, 2020 Assets Current Assets: Accounts Receivable $ 720,000 (-) Allowance for Doubtful Accounts $ (34,860) Accounts Receivable, net $ 685,140

4. Income Statement -

Swiss Supplies Income Statement As on December 31, 2020 Bad Debts $ 20,460

5. Ledgers -

b Dec 31/19 Balance a.1 Accounts Receivable $ 54,000 $ 490,000 $ 24,000 $2,100,000 $ 26,000 $ 24,000 $1,790,000 c.2 Allowance for Doubtful Accounts d $ 26,000 Dec 31/19 $ 16,400 Balance $ 24,000 c.1 $ 20,460 2 c.1 Balance $ 720,000 $ 34,860 Balance $ 2,614,000 $2,614,000 $ 60,860 $ 60,860