Question

The accounts receivable balance for Tina Corporation is $3,200,000 as of October 31, 2020. Before calculating and recording the month’s bad debt expense, there is a credit balance in the Allowance for Doubtful Accounts of $50,000. The October 2020 net sales were $24,000,000. In the past several years, 1% of net sales have proven uncollectible. An aging of accounts receivable results in a $260,000 estimate for the Allowance for Doubtful Accounts as of October 31, 2020. PART A: PERCENT OF SALES METHOD Assume that Tina Corporation uses the percent of sales method to estimate future uncollectible accounts. • What adjusting entry does Tina make to record October 2020 Bad Debt Expense? Bad Debts Expense 190,000 Allowance for Doubtful Account 190,000 • What is “Accounts Receivable, net” on Tina’s October 31, 2020 Balance Sheet? $___________ • What is “Bad Debt Expense” on Tina’s October 2020 Income Statement? $___________ PART B: ANALYSIS OF RECEIVABLES METHOD Assume that Tina Corporation instead uses the analysis of receivables method to estimate future uncollectible accounts. • What adjusting entry does Tina make to record October 2020 Bad Debt Expense? • What is “Accounts Receivable, net” on Tina’s October 31, 2020 Balance Sheet? $___________ • What is “Bad Debt Expense” on Tina’s October 2020 Income Statement? $___________

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Answer 1