For the fiscal year 2015, Zeus Inc. recorded $1,750,000 in credit sales. On December 31, 2015, the company had a $250,000 debit balance in Accounts Receivable and the Allowance for Doubtful Accounts had a $3,000 credit balance. Required: 1. Prepare the necessary adjusting journal entry for December 31 to record the estimated bad debt expense. Assume that bad debts are estimated at 1% of credit sales. 2. Prepare the necessary adjusting journal entry for December 31 to record the estimated bad debt expense. Assume that bad debts are estimated to be 8% of the outstanding accounts receivable. 3. Assume that a $3,300 customer account was written off earlier in the year and that the customer now pays the balance owed in full. Prepare the journal entry, or entries, to record the collection of this customer's account
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.
For the fiscal year 2015, Zeus Inc. recorded $1,750,000 in credit sales. On December 31,
2015, the company had a $250,000 debit balance in
for Doubtful Accounts had a $3,000 credit balance.
Required:
1. Prepare the necessary
bad debt expense. Assume that
2. Prepare the necessary adjusting journal entry for December 31 to record the estimated
bad debt expense. Assume that bad debts are estimated to be 8% of the outstanding
accounts receivable.
3. Assume that a $3,300 customer account was written off earlier in the year and that the
customer now pays the balance owed in full. Prepare the journal entry, or entries, to
record the collection of this customer's account
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