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Ledger of Houston's Company

The ledger of Houston's Company at the end of the current year shows an A/R balance of $150,000, Sales $1,000,000 and Sales Returns and Allowances of $25,000.

Part A - Houston's customer Bryant, Inc has gone bankrupt. Their only invoice for $5,250 has to be written off using the direct write off method. Prepare the journal entry for this.

Part B - If the company's Allowance for Doubtful Accounts has debit balance of $1,000 in the Trial Balance, prepare the journal entry if the write off for Bad Debt Expense is to be:
(1) 2% of net sales and also
(2) 6% of A/R
(prepare two journal entries)

Part C - If the company's Allowance for Doubtful Accounts has a credit balance of $500 in the Trial Balance, prepare the journal entries if the write off for Bad Debt Expense is to be:
(1) 1.5% of net sales and also
(2) 5% of A/R

Prepare two journal entries.

Solution Preview

The ledger of Houston's Company at the end of the current year shows an A/R balance of $150,000, Sales $1,000,000 and Sales Returns and Allowances of $25,000.

Part A - Houston's customer Bryant, Inc has gone bankrupt. Their only invoice for $5,250 has to be written off using the direct write off method. Prepare the journal entry for this.

Bad Debt Expense 5,250
Accounts Receivable 5,250

Under direct write off method, we will need to debit bad debt expense and credit accounts receivable.

Part B - If the company's Allowance for Doubtful Accounts has debit ...

Solution Summary

This solution is comprised of a detailed explanation to prepare Doubtful Accounts Journal entries for Houston's Company.

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