Question

Rogala Foods Inc. was formed in 2015 with the merger of Grouch Mayer and Tashamo Corporation. The company reported the following rounded amounts for the year ended January 3, 2016 (all amounts in millions):

	Debits				Credits
Accounts Receivable	$	1,190
Allowance for Doubtful Accounts					$	40
Sales (assume all on credit)						19,000

Required:

1. Assume Rogala uses 1/4 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.

2. Assume instead Rogala uses the aging of accounts receivable method and estimates that $87 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense.

3. Assume instead that Rogala’s uses the aging of accounts receivable method and estimates that $87 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense assuming Rogala’s unadjusted balance in Allowance for Doubtful Accounts at January 3, 2016 was a debit balance of $27.

4. If one of Rogala’s customers declared bankruptcy, what journal entry would be used to write off its $15 balance?

1. Assume Rogala uses 1/4 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Round your answers to the nearest whole number.)

• Record the entry for bad debt expenses under the percentage of credit sales method.

2.

Assume instead Rogala uses the aging of accounts receivable method and estimates that $87 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10). Round your answers to the nearest whole number.)

• Record the entry for bad debt expenses under the aging of accounts receivable method.

3.

Assume instead that Rogala’s uses the aging of accounts receivable method and estimates that $87 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense assuming Rogala’s unadjusted balance in Allowance for Doubtful Accounts at January 3, 2016 was a debit balance of $27. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

• Record the adjusting entry for bad debts as of January 3, 2016 using the aging of accounts receivable method.

4.

If one of Rogala’s customers declared bankruptcy, what journal entry would be used to write off its $15 balance? (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Enter your answers in millions (i.e., 10,000,000 should be entered as 10).)

• Record the write-off of a certain customer account totaling $15 which is not collectible due to bankruptcy declared by the customer.

Answer 1

1) Adjusting entry

No	General Journal	Debit	Credit
	Bad debt expense (19000*1%*1/4)	48
	Allowance for doubtful accounts		48

2) Adjusting entry

No	General Journal	Debit	Credit
	Bad debt expense (87-40)	47
	Allowance for doubtful accounts		47

3) Adjusting entry

No	General Journal	Debit	Credit
	Bad debt expense (87+27)	114
	Allowance for doubtful accounts		114

4) Journal entry

No	General Journal	Debit	Credit
	Allowance for doubtful accounts	15
	Account receivable		15