At the end of the current year, the accounts receivable account has a debit balance of $6,125,000 and net sales

At the end of the current year, the accounts receivable account has a debit balance of $6,125,000 and net sales for the year total $66,800,000. Determine the amount of the adjusting entry to provide for doubtful accounts under each of the following assumptions:

a. The allowance account before adjustment has a debit balance of $18,000. Bad debt expense is estimated at ¾ of 1% of net sales.

b. The allowance account before adjustment has a debit balance of $18,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $475,000.

c. The allowance account before adjustment has a credit balance of $10,000. Bad debt expense is estimated at ½ of 1% of net sales.

d. The allowance account before adjustment has a credit balance of $10,000. An aging of the accounts in the customer ledger indicates estimated doubtful accounts of $360,000.


Answer:
a. $501,000 ($66,800,000 × 0.0075)
b. $493,000 ($475,000 + $18,000)
c. $334,000 ($66,800,000 × 0.0050)
d. $350,000 ($360,000 – $10,000)




Journalize the following transactions in the accounts of Pro Medical Co., a medical equipment company that uses the direct write-off method of accounting for uncollectible receivables:

Jan. 30. Sold merchandise on account to Dr. Cindy Mott, $85,000. The cost of the merchandise sold was $50,000.

June 3. Received $48,000 from Dr. Cindy Mott and wrote off the remainder owed on the sale of January 30 as uncollectible.

Nov. 27. Reinstated the account of Dr. Cindy Mott that had been written off on June 3 and received $37,000 cash in full payment.


Answer:

Jan. 30 Accounts Receivable—Dr. Cindy Mott 85,000
Sales 85,000
30 Cost of Merchandise Sold 50,000
Merchandise Inventory 50,000
June 3 Cash 48,000
Bad Debt Expense 37,000
Accounts Receivable—Dr. Cindy Mott 85,000
Nov. 27 Accounts Receivable—Dr. Cindy Mott 37,000
Bad Debt Expense 37,000
27 Cash 37,000
Accounts Receivable—Dr. Cindy Mott 37,000