Question

In its first year of operations, Cloudbox has credit sales of $200,000. Its year-end balance in accounts receivable is $10,000, and the company estimates that $1,500 of its accounts receivable is uncollectible.

a. Prepare the year-end adjusting entry to estimate bad debts expense.
b. Prepare the current assets section of Cloudbox’s classified balance sheet assuming Inventory is $22,000, Cash is $14,000, and Prepaid Rent is $3,000. Note: The company reports Accounts receivable, net on the balance sheet.

Answer 1

Cloudbox
Journal entries
Date	Account	Debit	Credit
31-Dec	Bad debts expense	$        1,500
	Allowance for doubful debts		$        1,500

Cloudbox
Balance Sheet
As of December 31
Assets
Current Assets
Cash	14,000
Accounts Receivable, net	8,500	=10000-1500
Inventory	22,000
Prepaid Rent	3,000
Total Current Assets	47,500