Question

The December 31, 2016 balance sheet of the Rakmer Company had Accounts Receivable of $650,000 and a credit balance in Allowance for Doubtful Accounts of $33,000. During 2017, the following transactions occurred: sales on account $1,550,000; sales returns and allowances, $100,000; collections from customers, $1,250,000; accounts written off, $35,000; previously written off accounts of $8,000 were collected. Instructions (a) Journalize the 2017 transactions. (b) If the company uses the percentage of receivables basis to estimate bad debt expense and determines that uncollectible accounts are expected to be 6% of accounts receivable, what is the adjusting entry at December 31, 2017

Answer 1

The answer is given below;

Step-by-step explanation:

a. A/R Dr.$1,550,000

Sales Cr.$1,550,000

Sales Returns Dr.$100,000

A/R Cr.$100,000

Bank Dr.$1,250,000

A/R Cr.$1,250,000

Bad Debt Expense Dr.$35,000

A/R Cr.$35,000

A/R Dr.$8,000

Bad Debt Expense Cr.$8,000

Bank Dr.$8,000

A/R Cr.$8,000

b. Allowance for Doubtful Accounts-closing $815,000*6%=$48,900

(650,000,1,550,000-100,000-1,250,000-35,000)=$815,000

Opening Balance ( $33,000)

Allowance for the year $15,900

Bad Debt Expense Dr.$15,900

Allowance for Doubtful Accounts Cr.$15,900