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# Computing Debt Expenses

A. Compute bad debts expense based on the following information:

(a) ABC Company estimates that 2% of net credit sales will become uncollectible. Sales are \$600,000, sales returns and allowances are \$30,000, and the allowance for doubtful accounts has a \$6,000 credit balance.

(b) ABC Company estimates that 10% of accounts receivable will become uncollectible. Accounts receivable are \$100,000 at the end of the year, and the allowance for doubtful accounts has a \$500 debit balance.

B. Mozart Company uses the allowance method for estimating uncollectible accounts. Prepare in journal form, without explanations, the entries to record the following transactions:

January 5 Sold merchandise to Antonio Salieri for \$2,000, terms n/15.

April 15 Received \$600 from Antonio Salieri on account.

August 21 Wrote off as uncollectible the balance of the Antonio Salieri account when she declared bankruptcy.

October 5 Unexpectedly received a check for \$300 from Antonio Salieri. It is not felt any more will be received from Winston

C. On March 1, John Jay Company borrows \$150,000 from Ottawa State Bank by signing a 6-month, 8%, interest-bearing note.

Instructions: Prepare in journal form, without explanations, the entries below associated with the note payable on the books of John Jay Company.

(a) Prepare the entry on March 1 when the note was issued.
(b) Prepare any adjusting entries necessary on June 30 in order to prepare the semi-annual financial statements. Assume no other interest accrual entries have been made.
(c) Prepare the adjusting entry at August 31 to accrue interest.
(d) Prepare the entry to record payment of the note at maturity.

#### Solution Summary

The expert computes bad debts expenses. The adjusted entries for accrue interest is prepared.

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