Question

Rogala Foods Inc. was formed in 2015 with the merger of Grouch Mayer and Tashamo Corporation....

Rogala Foods Inc. was formed in 2015 with the merger of Grouch Mayer and Tashamo Corporation. The company reported the following rounded amounts for the year ended January 3, 2016 (all amounts in millions):

Debits Credits
Accounts Receivable $ 1,070
Allowance for Doubtful Accounts $ 32
Sales (assume all on credit) 17,800

Required:

  1. Assume Rogala uses 1/2 of 1 percent of sales to estimate its Bad Debt Expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad Debt Expense has been recorded yet.

  2. Assume instead Rogala uses the aging of accounts receivable method and estimates that $74 of its Accounts Receivable will be uncollectible. Prepare the adjusting journal entry required at January 3, 2016, for recording Bad Debt Expense.

  3. Assume instead that Rogala’s uses the aging of accounts receivable method and estimates that $74 of its Accounts Receivable will be uncollectible. Prepare the year-end adjusting journal entry for recording Bad Debt Expense assuming Rogala’s unadjusted balance in Allowance for Doubtful Accounts at January 3, 2016 was a debit balance of $35.

  4. If one of Rogala’s customers declared bankruptcy, what journal entry would be used to write off its $20 balance?

Homework Answers

Answer #1

1) Adjusting entry

No General Journal Debit Credit
Bad debt expense (17800*1%*1/2) 89
Allowance for doubtful accounts 89

2) Adjusting entry

No General Journal Debit Credit
Bad debt expense (74-32) 42
Allowance for doubtful accounts 42

3) Adjusting entry

No General Journal Debit Credit
Bad debt expense (74+35) 109
Allowance for doubtful accounts 109

4) Adjusting entry

No General Journal Debit Credit
Allowance for doubtful accounts 20
Account receivable 20
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