Question

Question 2 The ledger of Sheridan Company at the end of the current year shows Accounts Receivable $84,500; Credit Sales $756,230; and Sales Returns and Allowances $37,220. (a) If Sheridan Company uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Sheridan Company determines that Matisse’s $893 balance is uncollectible. (b) If Allowance for Doubtful Accounts has a credit balance of $1,107 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable. (c) If Allowance for Doubtful Accounts has a debit balance of $480 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.

Answer 1

Date	Account title	Debit	credit
a	Bad debt expense	893
	Accounts receivable		893
b	Bad debt expense	7343
	Allowance for doubtful account		7343
c	Bad debt expense	7240
	Allowance for doubtful account		7240

b)Esimated uncollectible account at end = 84500*.10=8450

Bad debt expense= Esimated uncollectible account at end -unadjusted balance in allowance account

       = 8450-1107

              = 7343

c)Esimated uncollectible account at end = 84500*.08= 6760

Bad debt expense= Esimated uncollectible account at end -unadjusted balance in allowance account

       = 6760-(-480)

        = 6760+480

              = 7240