Question

Patagonia Corp.’s unadjusted trial balance included the following: Debit           Credit          Accounts receivable.........................................

Patagonia Corp.’s unadjusted trial balance included the following:

Debit           Credit

         Accounts receivable..................................................................      $140,000

         Allowance for doubtful accounts........................................... $890

         Sales............................................................................................. 425,000

         Sales returns and allowances.................................................           10,000

Instructions

a)      Prepare adjusting journal entries assuming that the estimate of uncollectibles is determined by using 4% of gross accounts receivable.

b)     Prepare adjusting journal entries assuming that the estimate of uncollectibles is determined by using 1.5% of net sales.

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Answer #1
Answer
Journal entries
S.No. Accounts title and explanations Debit Credit
a. Bad debt exp ($140,000 * 4%) - $890 $     4,710
Allowance for doubtful accounts $     4,710
(To Record Bad debt exp)
b. Bad debt exp ($425,000 - $10,000) * 1.5% $     6,225
Allowance for doubtful accounts $     6,225
(To Record Bad debt exp)
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