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Bando Company has a \$300,000 balance in Accounts Receivable and a \$4,000 debit balance in Allowance for Doubtful Accounts. Credit sales for the period totaled \$1,800,000. What is the amount of the bad debt adjusting entry if Bando uses a percentage of credit sales basis (at 2%) or a percentage of receivables basis (at 10%)?
% Credit Sales % Receivables
a. \$36,000 \$30,000
b. \$40,000 \$26,000
c. \$36,000 \$34,000
d. \$32,000 \$26,000

#### Solution Preview

In credit sales, we do not look at the balance in the allowance account and the adjusting ...

#### Solution Summary

The solution explains how to calculate the amount of the bad debt adjusting entry

\$2.19

## Journal Entries

Problem #1

Presented below is an aging schedule for Lewis Company.
Customer Total: Not Yet Due: Number of Days Past Due
1-30 31-60 61-90 Over 90
Anders \$20,000 \$9,000 \$11,000
Baietto 30,000 \$30,000
Cyrs 50,000 15,000 5,000 \$30,000
DeJong 38,000 \$38,000
Others 126,000 92,000 15,000 13,000 6,000
\$264,000 \$137,000 \$29,000 \$24,000 \$30,000 \$44,000
Estimated Percentage Uncollectible 2% 5% 10% 24% 50%
Total Estimated Bad Debit \$35,790 \$2,740 \$1,450 \$2,400 \$7,200 \$22,000

At December 31, 2006, the unadjusted balance in Allowance for Doubtful Accounts is a credit of \$8,000

Instructions:
(a) Journalize and post the adjusting entry for bad debts at December 31, 2006.
Total Estimated Bad Debit Amount Debit / Credit
Current balance of Allowance for Doubtful Accounts Amount Debit / Credit
Required journal entry value Formula Debit / Credit

12/31/06 Account title Amount
Account title Amount

(b) Journalize and post to the allowance account the following events and transactions in the year 2007.
(b)(1) March 1, an \$1,100 customer balance originating in 2006 is judged uncollectible.
03/01/07 Account title Amount
Account title Amount

(b)(2) May 1, a check for \$1,100 is received from the customer whose account was written off as uncollectible on March 1.
05/01/07 Account title Amount
Account title Amount

05/01/07 Account title Amount
Account title Amount

(c) Journalize the adjusting entry for bad debts on December 31, 2007. Assume that the unadjusted balance in Allowance for Doubtful
Accounts is a debit of \$1,200 and the aging schedule indicates that total estimated bad debts will be \$31,300
Total Estimated Bad Debit Amount Debit / Credit
Current balance of Allowance for Doubtful Accounts Amount Debit / Credit
Required journal entry value Formula Debit / Credit

12/31/07 Account title Amount
Account title Amount
(\$31,300 + \$1,200)