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Concept explainers
Introduction:
To Prepare: Journal entriesfor the given transactions.
![Check Mark](/static/check-mark.png)
Answer to Problem 4PSA
Date | Accounts title and explanation | Debit $ | Credit $ |
2017 | |||
Account receivables | 1,345,434 | ||
Sales | 1,345,434 | ||
(to record credit sales) | |||
Cost of goods sold | 975,000 | ||
Merchandise inventory | 975,000 | ||
(to record cost of sales) | |||
Allowance for doubtful debts | 18,300 | ||
Accounts receivable | 18,300 | ||
(to record writing off uncollectible accounts receivables) | |||
Cash | 669,200 | ||
Account receivables | 669,200 | ||
(to record collection of credit sales) | |||
Bad debt expense1 | 28,169 | ||
Allowance for doubtful debts | 28,169 | ||
(to record | |||
2018 | |||
Account receivables | 1,525,634 | ||
Sales | 1,525,634 | ||
(to record credit sales) | |||
Cost of goods sold | 1,250,000 | ||
Merchandise inventory | 1,250,000 | ||
(to record cost of sales) | |||
Allowance for doubtful debts | 27,800 | ||
Accounts receivable | 27,800 | ||
(to record writing off uncollectible accounts receivables) | |||
Cash | 1,204,600 | ||
Account receivables | 1,204,600 | ||
(to record collection of credit sales) | |||
Bad debt expense2 | 32,199 | ||
Allowance for doubtful debts | 32,199 | ||
(to record bad debts) | |||
Explanation of Solution
Working notes
- To calculate the amount of bad debt:
- To calculate the amount of bad debt:
Closing balance of accounts receivable= credit sales − collections − amount written off
= 1,345,434 − 669,200 − 18,300
= $657,934
Required closing allowance= 1.5% of $657,934
= $9,869
Required adjustment = Unadjusted existing balance + required closing balance
= $18,300 + $9,869
= $28,169
Closing balance of accounts receivable= credit sales − collections − amount written off
= 1,525,634 − 1,204,600 − 27,800
= $293,234
Required closing allowance= 1.5% of $293,234
= $4,399
Required adjustment = Unadjusted existing balance + required closing balance
= $27,800 + $4,399
= $32,199
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Chapter 7 Solutions
Loose Leaf for Financial Accounting: Information for Decisions
- Financial Accounting: The Impact on Decision Make...AccountingISBN:9781305654174Author:Gary A. Porter, Curtis L. NortonPublisher:Cengage LearningPrinciples of Accounting Volume 1AccountingISBN:9781947172685Author:OpenStaxPublisher:OpenStax College
- College Accounting (Book Only): A Career ApproachAccountingISBN:9781337280570Author:Scott, Cathy J.Publisher:South-Western College PubCollege Accounting, Chapters 1-27AccountingISBN:9781337794756Author:HEINTZ, James A.Publisher:Cengage Learning,
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