Challenge Reflaction

Task 4: Francesca and Sophia decide to extend credit to their customers in order to increase HHEC.com’s sales. However, they are unsure how to account for credit sales and what method they should use to account for customers who do not pay for their credit purchases. They provide you with a series of transactions involving the sale of merchandise on credit and ask you to record these transactions in the general journal. They then provide you with the projected balance of Accounts Receivable at the end of Year 3 and ask you to determine the amount of bad debt expense using the indirect method.

Prepare journal entries for the following independent situations. a) The allowance for uncollectible accounts has a $525 debit balance prior to adjustment. An aging schedule prepared on December 31 reveals uncollectible accounts of $7,600.

b) The allowance for uncollectible accounts has a $500 credit balance prior to adjustment. An aging schedule prepared on December 31 reveals uncollectible accounts of $7,800.

c) The allowance for uncollectible accounts has a $700 credit balance prior to adjustment. Net credit sales during the year are $260,000 and 4% are estimated to be uncollectible.

d) The allowance for uncollectible accounts has an $800 credit balance prior to adjustment. Net credit sales during the year are $270,000 and 3.5% are estimated to be uncollectible.

ANSWER Particulars Debit Credit Bad Debt Expense 8,125 Allowance for Uncollectible Account 8,125

Bad Debt Expense 7,300 Allowance for Uncollectible Account 7,300

Bad Debt Expense 10,400

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Allowance for Uncollectible Account 10,400

Bad Debt Expense 9,450 Allowance for Uncollectible Account 9,450

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