At January 1, 2020, the credit balance of Vera Corp's Allowance for Doubtful Accounts was $400,000. During 2020, the bad debt expense entry was based on a percentage of net credit sales. Net sales for 2020 were $80 million, of which 90% were on account. Based on the information available at the time, the 2020 bad debt expense was estimated to be 0.8% of net credit sales. During 2020, uncollectible receivables amounting to $500,000 were written off against the allowance for doubtful accounts. The company has estimated that at December 31, 2020, based on a review of the aged account receivable, the allowance for doubtful accounts would be properly measured at $525,000. Instructions: Prepare a schedule calculating the balance in Vera Corp's Allowance for Doubtful Accounts at December 31, 2020. Prepare any Journal entry needed at year end to adjust the allowance for doubtful accounts to the required balance.

At January 1, 2020, the credit balance of Vera Corp's Allowance for Doubtful Accounts was $400,000. During 2020, the bad debt expense entry was based on a percentage of net credit sales. Net sales for 2020 were $80 million, of which 90% were on account. Based on the information available at the time, the 2020 bad debt expense was estimated to be 0.8% of net credit sales. During 2020, uncollectible receivables amounting to $500,000 were written off against the allowance for doubtful accounts. The company has estimated that at December 31, 2020, based on a review of the aged account receivable, the allowance for doubtful accounts would be properly measured at $525,000. Instructions: Prepare a schedule calculating the balance in Vera Corp's Allowance for Doubtful Accounts at December 31, 2020. Prepare any Journal entry needed at year end to adjust the allowance for doubtful accounts to the required balance.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Bad Debts

At the end of the accounting period, a financial statement is prepared by every company, then at that time while preparing the financial statement, the company determines among its total receivable amount how much portion of receivables is collected by the company during that accounting period.

Accounts Receivable

The word “account receivable” means the payment is yet to be made for the work that is already done. Generally, each and every business sells its goods and services either in cash or in credit. So, when the goods are sold on credit account receivable arise which means the company is going to get the payment from its customer to whom the goods are sold on credit. Usually, the credit period may be for a very short period of time and in some rare cases it takes a year.

Question

b) At January 1, 2020, the credit balance of Vera Corp's Allowance for Doubtful Accounts was
$400,000. During 2020, the bad debt expense entry was based on a percentage of net credit sales.
Net sales for 2020 were $80 million, of which 90% were on account. Based on the information
available at the time, the 2020 bad debt expense was estimated to be 0.8% of net credit sales.
During 2020, uncollectible receivables amounting to $500,000 were written off against the
allowance for doubtful accounts. The company has estimated that at December 31, 2020, based
on a review of the aged account receivable, the allowance for doubtful accounts would be
properly measured at $525,000.
Instructions:
Prepare a schedule calculating the balance in Vera Corp's Allowance for Doubtful Accounts at
December 31, 2020. Prepare any Journal entry needed at year end to adjust the allowance for
doubtful accounts to the required balance.

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