Question

Learning Objectives 1,3 P9-30A Accounting for uncollectible accounts using the allowance method (percent-of-sales) and reporting receivables on the balance sheet Delta Watches completed the following selected transactions during 2018 and 2019; 2. Net AR $119,800 2018 Estimated that bad debts expense for the year was 2% of credit sales of $450,000 and recorded that amount as expense. The company uses the allowance method Dec. 31 31 2019 Jan. 17 Made the closing entry for bad debts expense Sold merchandise inventory to Mack Smith, $400, on account. Ignore Cost of Goods Sold Jun. 29 Wrote off Mack Smith's account as uncollectible after repeated efforts to collect from him. Aug. 6 Received $400 from Mack Smith, along with a letter apologizing for being so late. Reinstated Smith's account in full and recorded the cash receipt. Dec. 31 Made a compound entry to write off the following accounts as uncollectible Cam Carter, $1,400; Mike Venture, $1,200; and Russell Reeves, $400. 31 Estimated that bad debts expense for the year was 2% on credit sales of $510,000 and recorded the expense 31 Made the closing entry for bad debts expense Requirements 1. Open T-accounts for Allowance for Bad Debts and Bad Debts Expense, assuming the accounts begin with a zero balance. Record the transactions in the general journal (omit explanations), and post to the two T Assume the December 31, 2019, balance of Accounts Receivable is $136,000 Show how net accounts receivable would be reported on the balance sheet at -accounts. 2. that date.

Answer 1

Part 1
Date	Account titles and explanation	Debit $	Credit $
2018
Dec 31	Bad debt Expense (450,000*2%)	9,000
	Allowance for bad debts		9,000
	(To record the bad debt)
Dec 31	Income summary	9,000
	Bad debt expense		9,000
	(To close the bad debt expense)
2019
Jan 17	Accounts Receivable-Mack Smith	400
	Sales Revenue		400
	(To record the sales on account)
Jun 29	Allowance for bad debts	400
	Accounts Receivable-Mack Smith		400
	(To record the write off of Mack smith account)
Aug 6	Accounts Receivable-Mack Smith	400
	Allowance for bad debts		400
	(to reinstate the previuously written off account)
	Cash	400
	Accounts Receivable-Mack Smith		400
	(To record the cash receipt from Mack smith)
Dec 31	Allowance for bad debts	3,000
	Account receivable - Cam Carter		1,400
	Account Receivable- Mike Venture		1,200
	Account Receivable- Russell Reeves		400
	(to record the write off of multiple accounts)
Dec 31	Bad debt Expense (510,000*2%)	10,200
	Allowance for bad debts		10,200
	(To record the bad debt)
31-Dec	Income summary	10,200
	Bad debt expense		10,200
	(To close the bad debt expense)
	Allowance for bad Debts
	Particulars	Debit	Particulars	Credit
			2018
			Dec 31	9,000
			Bal.	9,000
			2019
	Jun 29	400	Opening Bal	9,000
	Dec 31	3,000	Aug 6	400
			Dec 31	10,200
			Bal.	16,200
	Bad Debts expense
	Particulars	Debit	Particulars	Credit
	2018
	Dec 31	9,000	Dec 31	9,000
	2019
	Dec 31	10,200	Dec 31	10,200
Part 2	Balance sheet (partial)
	Current assets:
	Account receivable	136,000
	Less: Allowance for bad debts	(16,200)
	Accounts Receivable (Net)	119,800