Question

The Unadjusted Trial Balance has been prepared (provided below and also in ThreeBrothers worksheet.xlsx), showing only those accounts with a non-zero balance. You have gathered the following information that will be helpful in preparing any necessary adjusting entries (add any accounts necessary). Good luck!

ThreeBrothers	Unadjusted Trial Balance
	Dec. 31, 2017
	debit	credit
Cash	4,400,000
Accounts Receivable	22,500,000
Allowance for Bad Debts		20,000
Inventory	2,500,000
Purchases	85,832,500
Construction in Progress Inventory	36,000,000
Billings on Contract		35,000,000
PP&E	60,000,000
Accumulated Depreciation		36,000,000
Accounts Payable		18,000,000
Income Tax Payable		136,000
Common Stock		1,500,000
Retained Earnings		33,444,000
Sales Revenue		134,500,000
Sales Returns	2,017,500
NEWPROD Revenue		9,000,000
FITTRACKER Revenue		10,000,000
Cost of NEWPROD Sold	8,100,000
Cost of FITTRACKER Sold	4,500,000
General and Admin	51,750,000
TOTAL	277,600,000	277,600,000

Bad debt for Accounts Receivable: ThreeBrothers management does not expect there to be any change in the collectability of its credit sales related to its normal operations. ThreeBrothers uses the Accounts Receivable approach to estimate bad debts, and the aging schedule at 12/31/2017 is summarized below

Days outstanding     % of AcctsRec      Estimated % Uncollectible

0-30 days                          40%                             0.30%

30-60 days                        35%                             0.80%

60-90 days                        15%                             10.00%

>90 days                           10%                             25.00%

I need the adjusting journal entry and closing journal entry, if necessary. Thank You.

Answer 1

Solution:

Journal Entries - Klugman Company Inc.
Date	Particulars	Debit	Credit
31-Dec-17	Bad debts Expense Dr ($990,000 - $20,000)	$970,000.00
	To Allowance for uncollectible accounts		$970,000.00
	(Being provision for uncollectible accounts recorded)
31-Dec-17	Income Summary Dr	$970,000.00
	To Bad debts expense		$970,000.00
	(Being bad debts expense closed to income statement)