Question

At the end of the current year, the balance of the accounts receivable account for Astro Masonry was $57,000. Credit sales for the year were $629,000.

Determine the amount of the adjusting entries for uncollectible accounts and the amount of the net receivables under each of the following assumptions.

1. The Allowance for Bad Debts has a credit balance of $840.

   a. The percentage of sales method is used and it is estimated that bad debts expense will be 1.6% of credit sales.

   b.The percentage of receivables method is used and based on an analysis of the accounts it is estimated that bad debts will amount to $3,700.

Page: 1

	S.No.	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	a.	Bad Debt Expense				1
2						2
3	b.					3
4						4

2. The Allowance for Bad Debts has a debit balance of $400.

  a. The percentage of sales method is used and it is estimated that bad debts expense will be 1% of credit sales.

  b. The percentage of receivables method is used and based on an analysis of the accounts it is estimated that bad debts will amount to $3,900.

Page: 1

	S. No.	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1	a.					1
2						2
3	b.					3
4						4

Answer 1

S.No.	DESCRIPTION	POST. REF.	DEBIT	CREDIT
a.	Bad Debts Expense		$10,064
	Allowance for Bad Debts			$10,064
	($629,000 x 1.6%)
b.	Bad Debts Expense		$2,860
	Allowance for Bad Debts			$2,860
	($3,700 - $840)
S.No.	DESCRIPTION	POST. REF.	DEBIT	CREDIT
a.	Bad Debts Expense		$10,064
	Allowance for Bad Debts			$10,064
	($629,000 x 1.6%)
b.	Bad Debts Expense		$4,100
	Allowance for Bad Debts			$4,100
	($3,700 + $400)