Respuesta :
Answer:
(a) If Marin uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Marin determines that Matisse’s $700 balance is uncollectible.
Dr Bad Debt Expense $ 700
Cr Accounts Receivable $ 700
(b) If Allowance for Doubtful Accounts has a credit balance of $1,300 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.
If we assume that the balance on Accounts Receivable is $20,000, then the adjusting entry is the next:
Dr Accounts Receivable $ 20,000
Dr Bad Debt Expense $ 700
Cr Accounts Receivable $ 700
(c) If Allowance for Doubtful Accounts has a debit balance of $450 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.
If we assume that the balance on Accounts Receivable is $20,000, then the adjusting entry is the next:
Dr Bad Debt Expense $ 2,050
Cr Accounts Receivable $ 2,050
Explanation:
(a) If Marin uses the direct write-off method to account for uncollectible accounts, journalize the adjusting entry at December 31, assuming Marin determines that Matisse’s $700 balance is uncollectible.
Dr Bad Debt Expense $ 700
Cr Accounts Receivable $ 700
(b) If Allowance for Doubtful Accounts has a credit balance of $1,300 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 10% of accounts receivable.
If we assume that the balance on Accounts Receivable is $20,000, then the adjusting entry is the next:
Dr Accounts Receivable $ 20,000
Dr Bad Debt Expense $ 700
Cr Accounts Receivable $ 700
(c) If Allowance for Doubtful Accounts has a debit balance of $450 in the trial balance, journalize the adjusting entry at December 31, assuming bad debts are expected to be 8% of accounts receivable.
If we assume that the balance on Accounts Receivable is $20,000, then the adjusting entry is the next:
Dr Bad Debt Expense $ 2,050
Cr Accounts Receivable $ 2,050
If the company applies the allowance method, it means that the account Allowance for Uncollectible Accounts must show as balance the % of accounts receivables as CREDIT.
Because the company has a debit balance in that account it's necessary to register an entry that compensate the DEBIT value and reflect A CREDIT estimated as % of account receivable.
Bad accounts are those credits granted by the company and there is no possibility of being charged.
"When customers buy products on credits but the company cannot collect the debt, then it's necessary to cancel the unpaid invoice as uncollectible."
One way is to directly cancel bad debts at the time it was decided that the credit is bad, the total amount reported as bad debt expenses negatively affect the income statement and the accounts receivable are reduced by the same amount, less assets
The other way is to determine a percentage of the total amount of accounts receivable as bad debts, there are many ways to analyze accounts receivable and calculate the value of bad debts.
When the company has the percentage of uncollectible accounts, the required journal entry is Bad Expenses (debit) with Reserve for Bad Accounts (credit)
At the time of cancellation, since the expenses were recognized before, we only use the Allowance for Uncollectible Accounts (Debit) with accounts receivable (credit), with this we are recognizing the bad credit of the company.
