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Question: Bad debts expense with a/r and credit sales?

(Posted by: Ashley A on 2009-11-16 07:28:52)

At December 31 of the current year, a company reported the following: Total sales for current year: $780, 000 includes $160, 000 in cash sales. Accounts receivable balance at Dec. 31, current year: $190, 000 Bad debts written off during the current year: $6, 800 Balance of Allowance for Doubtful Accounts at January 1, current year: $8, 300 Prepare the necessary adjusting entries to record bad debts expenses assuming this company's bad debts are estimated to equal: a. 1.5 % of credit sales b. 5 % of accounts receivable. Show the calculations, journal entries and resulting ‘T’ Accounts (Record answers in Space Below) Debit Cash 160, 000 Credit Sales 780, 000 Credit Allowance 8, 300 Debit A/ R 190, 000 Debit A/ R 780, 000 Credit A/ R 160, 000 Credit A/ R 6, 800 So I was getting a total of $794, 900 for a/ r that just doesn’t feel right. Can anyone can critique my work? And I know for the credit sales I have to do the current year times 1.5 % and I will get bad debt expense So that would be 780, 000 times 1.5 % which equals 11, 700 Dr. Bad Debt Expense 11, 700 Cr. Allowance (11, 700) Alright for A/ R I did 5 % x 190, 000 = 9, 500 But since there was a balance of 8, 300 before 9, 500- 8, 300=1, 200 DR. Bad Debt Expense 1, 200 Cr. Allowance (1, 200) Alright does this math seem wrong and I missing something. Y’alls help will greatly be apperciated

Posted by: Sandy on 2009-11-16, 19:14:31

At December 31 of the current year, a company reported the following: Total sales for current year: $780,000 includes $160,000 in cash sales, so credit sales = $620,000 Accounts receivable balance at Dec. 31, current year: $190,000 Bad debts written off during the current year: $6,800 Balance of Allowance for Doubtful Accounts at January 1, current year: $8,300 Prepare the necessary adjusting entries to record bad debts expenses assuming this company's bad debts are estimated to equal: a. 1.5% of credit sales Dr Bad debts expense $9,300 ($620,000 x 1.5%) Cr Allowance for Doubtful Accounts $9,300 Your beginning balance for the Allowance account was $8300, you wrote off $6800 during the yr, and you added $9300, so ending balance is $10,800. You should do this for the rest of the accounts. Just be careful with the data given, especially note the timeline. Some info given is at Dec 31, some at Jan 1, and some is for what transpired during the year. resulting Accounts Dec 31 balances Bad debts expense $9,300 Dr Allowance for Doubtful Accounts $10,800 Cr Accounts receivable $190,000 Dr b. 5% of accounts receivable Dr Bad debts expense $8,000 Cr Allowance for Doubtful Accounts $8,000 Your beginning balance for the Allowance account was $8300, you wrote off $6800 during the yr, that leaves you with a credit balance of 1,500. You want a credit balance of $190,000 x 5% or $9,500, so you only need an adjustment for $8,000. resulting Accounts Dec 31 balances Bad debts expense $8,000 Dr Allowance for Doubtful Accounts $9,500 Cr Accounts receivable $190,000 Dr

Posted by: KlemKiddleHopper on 2009-11-16, 14:20:03

One item right off and I didn't analize all of this was CASH sales 160,000.00 didn't get to accounts receivable