Question

following balances: Accounts receivable $ 12,700 Allowance for doubtful accounts $ 300 (Credit Balance) Net Credit...

following balances:

Accounts receivable $ 12,700

Allowance for doubtful accounts $ 300 (Credit Balance)

Net Credit Sales $ 640,000

a. If the company estimates that 1% of its net credit sales will be uncollectible, what would the journal entry look like?

b. If the company estimates that 10% of its accounts receivables will be uncollectible, what would the journal entry look like?

c. What is the net present value for both (a and b)?

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Homework Answers

Answer #1

a and b

General Journal Debit Credit
Baddebt Expenses ($640,000*1%) $   6,400
Allowance for doubtful accounts $   6,400
Baddebt Expenses ($12,700*10%)-$300) $      970
Allowance for doubtful accounts $      970

c.

A B
Accounts receivable $                             12,700 $                              12,700
Allowance for doubtful accounts $6,400+$300 = $6,700 $12,700*10% = $1,270
Accounts receivable (net) $                               6,000 $                              11,430

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