Question

Harris Company uses the allowance method of handling its credit losses. It estimates credit losses at one percent of credit sales, which were $2,700,000 during the year. On December 31, the Accounts Receivable balance was $450,000 and the Allowance for Doubtful Accounts had a credit balance of $30,600 before adjustment.

Prepare the adjusting entry to record the credit losses for the year.

Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet.


a.

General Journal
Date Description Debit Credit
Dec.31 AnswerBad Debts ExpenseAllowance for Doubtful Accounts Answer Answer
AnswerBad Debts ExpenseAllowance for Doubtful Accounts Answer Answer
To record allowance for credit losses.

b. (Do not use negative signs with your answers.)

Current Assets:
AnswerAccounts ReceivableLess: Allowance for Doubtful Accounts $Answer
AnswerAccounts ReceivableLess: Allowance for Doubtful Accounts Answer
$Answer

Answer 1

Dec.31 Bad Debts Expense 27000

December 31 Balance Sheet Accounts Receivable 392400

Step-by-step explanation:

Harris Company

Credit Sales for the current year $2700,000

Credit Losses = 1% of $ 2700,000= $ 27000

Add Allowance for Doubtful Accounts $ 30600 Cr

Required Adjustments $ 57,600 Cr

General Journal

Date Description Debit Credit

Dec.31 Bad Debts Expense 27000

Allowance for Doubtful Accounts 27000

December 31 Balance Sheet.

Accounts Receivable $450,000

Less: Allowance for Doubtful Accounts $57,600 ( 27000+ 30,600)

Accounts Receivable 392400