Question

JCrew grants its company 30 days' credit. Company uses allowance method for uncollectible accts receivable. During year, monthly bad debt is made by multiplying 3% times amount of credit sales for month. Acct receivable were 600,000 & allowance account had 64,000. What are the first 2 steps?

Answer 1

The question concerns accounting for uncollectible accounts receivable using the allowance method. The first two steps are to calculate the monthly bad debt expense at 3% of credit sales and then record this expense by adjusting the accounts appropriately in the ledger.

Step-by-step explanation:

The student is asking about accounting practices related to uncollectible accounts receivable using the allowance method. In this scenario, J.Crew provides 30 days' credit and accounts for bad debt by reserving 3% of the monthly credit sales as an allowance for doubtful accounts. To address the first two steps:

1. Determine the monthly bad debt expense by multiplying the credit sales for the month by 3%.
2. Make a journal entry to record the bad debt expense by debiting Bad Debt Expense and crediting Allowance for Doubtful Accounts.

In this situation, the actual figures for credit sales and allowance account are not provided for a specific month, so we cannot calculate the exact amount for these steps. However, these are the general steps for recording the estimate of uncollectible accounts using the allowance method.