Question

Yeti Company has credit sales of $620,000 during 2013 and estimates at the end of 2013 that 1.43% of these credit sales will eventually default. Also, during 2013, a customer defaults on a balance of $524 related to goods purchased in 2012. Prior to the write-off and the adjusting entry, Yeti's accounts receivable $304,000 and allowance for doubtful accounts balances were and $134 (credit), respectively.

1. Estimate the bad debt expense for the period.

2. Prepare the journal entry to record the write-off of the defaulted balance.

3. Prepare the adjusting entry to record the bad debt expense for 2013.

4. What is the net accounts receivable balance at the end of the year?

Answer 1

1.

Estimated bad debt expense = Sales *1.43% = $620000*1.43% = $8,866

2.

S.no.	Particulars	Debit	Credit
2	Allowance for Doubtful Accounts	$524
	To Accounts Receivable		$524

3.

S.no.	Particulars	Debit	Credit
3	Bad Debt Expense	$8,866
	To Allowance for Doubtful Accounts		$8,866

4.

net accounts receivable = $304000 - ($134+8866-524)

= $304000 - 8476

= $295,524