Question

The trial balance before adjustment of Larkspur, Inc. shows the following balances:

		Dr.		Cr.
Accounts receivable		$105,500
Allowance for doubtful accounts		1,960
Sales revenue (all on credit)				$698,000
Sales returns and allowances		29,100

A. Give the entry for bad debt expense for the current year assuming the allowance should be 4% of gross accounts receivable.

B. Give the entry for bad debt expense for the current year assuming historical records show that, based on accounts receivable aging, the following percentages will not be collected: (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

		Balance		Percentage Estimated to Be Uncollectible
0–30 days outstanding		$34,200		1%
31–60 days outstanding		48,500		5%
61–90 days outstanding		13,500		12%
Over 90 days outstanding		9,300		18%

C. Give the entry for bad debt expense for the current year assuming allowance for doubtful accounts is $1,960 but it is a credit balance and the allowance should be 4% of gross accounts receivable. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

D. Give the entry for bad debt expense for the current year assuming allowance for doubtful accounts is $1,960 but it is a credit balance and historical records show that the following percentages will not be collected: (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

		Balance		Percentage Estimated to Be Uncollectible
0–30 days outstanding		$34,200		1%
31–60 days outstanding		48,500		5%
61–90 days outstanding		13,500		12%
Over 90 days outstanding		9,300		18%

The list of possible accounts is as follows:

Accounts Payable
Accounts Receivable
Accrued Liabilities
Accumulated Depreciation - Equipment
Advances to Employees
Advertising Expense
Allowance for Doubtful Accounts
Allowance for Sales Returns and Allowances
Bad Debt Expense
Bank Charges Expense
Cash
Cash Over and Short
Due from Factor
Entertainment Expense
Equipment
Finance Expense
Finance Revenue
Freight in
Freight out
Gain on Disposal of Equipment
Gain on Disposal of Land
Interest Expense
Interest Income
Interest Receivable
Inventory
Land
Loss on Disposal of Equipment
Loss on Disposal of Land
Loss on Disposal of Receivables
Loss on Impairment
Miscellaneous Expense
No Entry
Notes Payable
Notes Receivable
Office Expense
Petty Cash
Postage Expense
Prepaid Expenses
Purchase Discounts
Recourse Liability
Refund Liability
Rent Expense
Sales Discounts
Sales Discounts Forfeited
Sales Returns and Allowances
Sales Revenue
Servicing Liability
Service Revenue
Supplies
Supplies Expense
Unearned Revenue

Answer 1

Working note for B and D: