Question

Kraft Foods Inc. is the second-largest food company in the world. Assume the company recently reported the following amounts in its unadjusted trial balance (in millions) as of December 31, 2017:

	Debits			Credits
Accounts Receivable	$	5,920
Allowance for Doubtful Accounts				$	154
Sales (assume all on credit)					56,400

Required:
1. Assume Kraft uses ½ of 1 percent of sales to estimate its Bad debt expense for the year. Prepare the adjusting journal entry required for the year, assuming no Bad debt expense has been recorded yet. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to the nearest whole dollar number.)

2. Assume instead that Kraft uses the aging of accounts receivable method and estimates that $313 million of its Accounts Receivable will be uncollectable. Prepare the adjusting journal entry required at December 31, 2017, for recording Bad Debt Expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions.)

3. Assume instead that Kraft uses the aging of accounts receivable method and estimates that $313 million of its Accounts Receivable will be uncollectable. Also, assume that the unadjusted balance in Kraft’s Allowance for Doubtful Accounts at December 31, 2017, was a debit balance of $27 million. Prepare the adjusting journal entry required at December 31, 2017, for recording bad debt expense. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions.)

4. If one of Kraft’s main customers declared bankruptcy in 2018, what journal entry would be used to write off its $22 million balance? (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions.)

Answer 1

The answer has been presented in the supporting sheet. For detailed answer refer to the supporting sheet.