Provide the following independent journal entries: a. July 31, 2019. We had $1,000,000 of credit sales in July. We estimate that our bad debt expense will be 1% of credit sales. b. Aug. 15, 2019. We have an account receivable from Frank Farmworker for $500. On Aug. 15 we decide that we will not collect this account, so need to write it off. On Sept. 5 we get a check from Frank in the mail. c. Dec. 31, 2019. Allowance for Bad Debts currently has a credit balance of $7,200. We perform an aging of accounts receivable, and determine that the Allowance should have a balance of $10,100. d. Dec. 31, 2020. We age our accounts receivable: Age of accounts . Days: 1-30 31-60 61-9091+Total Accounts receivable$85,000$40,000$10,000$2,000$137,000 Estimate % uncollectible 1% 5% 20% 60% What balance should the Allowance for Bad Debts have? Suppose the estimated % uncollectible is based on 2015-2019 data, but that the economy for 2020 is substantially worse. Would you change your estimated Allowance for Bad Debts? If you would change, how would you change it?
Provide the following independent
a. July 31, 2019. We had $1,000,000 of credit sales in July. We estimate that our bad debt expense will be 1% of credit sales.
b. Aug. 15, 2019. We have an account receivable from Frank Farmworker for $500. On Aug. 15 we decide that we will not collect this account, so need to write it off. On Sept. 5 we get a check from Frank in the mail.
c. Dec. 31, 2019. Allowance for
d. Dec. 31, 2020. We age our accounts receivable:
Age of accounts .
Days: 1-30 31-60 61-9091+Total
Accounts receivable$85,000$40,000$10,000$2,000$137,000
Estimate % uncollectible 1% 5% 20% 60%
What balance should the Allowance for Bad Debts have?
Suppose the estimated % uncollectible is based on 2015-2019 data, but that the economy for 2020 is substantially worse. Would you change your estimated Allowance for Bad Debts? If you would change, how would you change it?
Bad debt are the debt which is created when a receivable will not able to pay their amount of money owe, at the time of credit sale there are some customers or receivables which may not pay their share of debt hence, this debts are known as bad debt and considered as bad debt expense in the income statement.
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