Jars Plus recorded $862,430 in credit sales for the year and $496,000 in accounts receivable. The uncollectible percentage is 2.3% för the income statement method, and 3.0% for the balance sheet method. A. Record the year-end adjusting entry for 2018 bad debt using the income statement method. B. Record the year-end adjusting entry for 2018 bad debt using the balance sheet method. C. Assume there was a previous debit balance in Allowance for Doubtful Accounts of $10,220, record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method. D. Assume there was a previous credit balance in Allowance for Doubtful Accounts of $5,670, record the year-end entry for bad debt using the income statement method, and then the entry using the balance sheet method. If an amount box does not require an entry, leave it blank. If required, round final answers to two decimal places. 88 A. Dec. 31 To record bad debt, income statement method В. Dec. 31 To record bad debt, balance sheet method C. Dec. 31 To record bad debt, income statement method Dec. 31 To record bad debt, balance sheet method, previous debit balance D. Dec. 31 To record bad debt, income statement method Dec. 31 To record bad debt, balance sheet method, previous credit balance
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.
![**Educational Content on Accounting for Bad Debt**
**Scenario:**
Jars Plus recorded $862,430 in credit sales for the year and $496,000 in accounts receivable. The uncollectible percentage is 2.3% for the income statement method, and 3.0% for the balance sheet method.
### Instructions:
1. **A. Income Statement Method Adjusting Entry for 2018 Bad Debt:**
- Record the year-end adjusting entry using the income statement method.
2. **B. Balance Sheet Method Adjusting Entry for 2018 Bad Debt:**
- Record the year-end adjusting entry using the balance sheet method.
3. **C. Adjusting Entries with Previous Debit Balance:**
- Assume a previous debit balance in Allowance for Doubtful Accounts of $10,220.
- Record the year-end entry using both the income statement method and the balance sheet method.
4. **D. Adjusting Entries with Previous Credit Balance:**
- Assume a previous credit balance in Allowance for Doubtful Accounts of $5,670.
- Record the year-end entry using both the income statement method and the balance sheet method.
**Note:** If an amount box does not require an entry, leave it blank. Round final answers to two decimal places if required.
#### Entry Forms:
**A. December 31 (Income Statement Method)**
- Account: [Dropdown]
- Amount: [Input Box]
**B. December 31 (Balance Sheet Method)**
- Account: [Dropdown]
- Amount: [Input Box]
**C. December 31 (Previous Debit Balance)**
- Income Statement Method:
- Account: [Dropdown]
- Amount: [Input Box]
- Balance Sheet Method:
- Account: [Dropdown]
- Amount: [Input Box]
**D. December 31 (Previous Credit Balance)**
- Income Statement Method:
- Account: [Dropdown]
- Amount: [Input Box]
- Balance Sheet Method:
- Account: [Dropdown]
- Amount: [Input Box]
### Explanation:
- The dropdown lists allow selecting specific accounts related to bad debt adjustment.
- Input boxes capture numerical values post-calculation based on provided percentages and existing balances.
- This exercise helps illustrate how financial statements are adjusted for potential credit losses, using varying methods and balances.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5a8da5b2-6ded-413c-9ecd-d81425a9892b%2F2a333c96-6e36-41cd-bd45-fd4a2fb1f0ac%2Fzeyst3ac_processed.png&w=3840&q=75)
Accounts Receivables -
Accounts Receivables are the amount unpaid by the customer for the service rendered or goods sold. Amount in respect of the service or goods are remain unpaid.
Sometimes some Accounts receivables are not collected or uncollectable in future. Company has divided this into two parts -
- Direct Write off
- Allowance Method
1. Direct Write off Method -
Under direct write off method uncollectible accounts directly write off as bad debt expenses and reducing Accounts Receivables.
In case the written off accounts collected in future then company have to record reverse for the bad debt expense and debit to the accounts receivable. In this reversal Bad Debts will be recorded as Income for the company.
2. Allowance Method -
Under allowance method company make provision of uncollectible accounts at the end of the accounting period. Entry will be bad debts account debit to Allowance for doubtful accounts.
Allowance for doubtful accounts recorded as Credit balance in the current assets. It is deducted from the accounts receivables.
In case of write off accounts receivable then entry will be Allowance for uncollectible accounts debit to accounts receivable and In case we recovered already write off accounts then we have to make reverse entry.
It is contra assets of the company.
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