Selected account balances from a company's general ledger are listed below. Cash $200,000

Problem 9-1  Allowance Write-Off Method of Dealing with Bad Debts

Selected account balances from a company's general ledger are listed below.

Cash    $200,000

Accounts Receivable (beginning balance)    107,000

Allowance for Doubtful Accounts (beginning normal balance)     5,000

Required:

1.  Journalize the transactions a through f assuming the company uses the allowance write-off method.        a.  Made cash sales of $1,000,000.

b.  Made credit sales of $800,000.

c.  Collected $700,000 during year from customers on account.

d.  Wrote off bad debts of $7,000 per year.

e.  Recovered bad debts of $600 from previous year.

f.  Recovered bad debts of $400 from current year.

2.  Post transactions a through f to the general ledger accounts provided below the general journal.

3.  After posting a through f, the balance of the Allowance for Bad Debtsaccount should be a $1,000 debit. Assuming a debit of $1,000,

     a.  Calculate the year-end bad debt adjusting entry amount assuming the company uses the aging of receivables method and realizable receivables are estimated at 95% of ending accounts receivable and journalize the adjusting entry.  (Hint:  What is bad debt amount?)

     b.  Calculate the year-end bad debt adjusting entry amount assuming the company uses the percent of sales method where 1.25% of credit sales are estimated to be uncollectible and journalize the adjusting entry.

4.  Assume the Allowance for Bad Debts account had a $1,000 normal credit balance instead of the debit balance.

     a.  Calculate the year-end bad debt adjusting entry amount if the company uses the aging of receivables method and realizable receivables are estimated at 95% of ending accounts receivable and journalize the adjusting entry.  (Hint:  What is bad debt amount?)

     b.  Calculate the year-end bad debt adjusting entry amount if the company uses the percent of sales method where 1.25% of creditsales are estimated to be uncollectible and journalize the adjusting entry.