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Q6Eb

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Financial & Managerial Accounting
Found in: Page 345
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

At each calendar year-end, Mazie Supply Co. uses the percent of accounts receivable method to estimate bad debts. On December 31, 2017, it has outstanding accounts receivable of $55,000, and it estimates that 2% will be uncollectible. Prepare the adjusting entry to record bad debts expense for year 2017 under the assumption that the Allowance for Doubtful Accounts has

(b) a $291 debit balance before the adjustment.

A debit balance before the adjustment will be added to the amount of total estimated value of uncollectible against the debtors in an organization.

See the step by step solution

Step by Step Solution

Adjusting journal entry

Date

Particulars

Debit

Credit

2017

Bad debt expense

$1,391

Allowance for doubtful accounts

$1,391

(To record the bad debt expense)

Working notes

Particulars

Amount

Unadjusted balance

$291

Add: Estimated uncollectible

$1,100

Bad debt expense

$1,391

Most popular questions for Business-studies Textbooks

The following selected transactions are from Springer Company.

2016

Nov. 1 Accepted a $4,800, 90-day, 8% note dated this day in granting Steve Julian a time extension on his past-due account receivable.

Dec. 31 Made an adjusting entry to record the accrued interest on the Julian note.

2017

Jan. 30 Received Julian’s payment for principal and interest on the note dated November 1.

Feb. 28 Accepted a $12,600, 30-day, 8% note dated this day in granting a time extension on the pastdue account receivable from King Co.

Mar. 1 Accepted a $6,200, 60-day, 12% note dated this day in granting Myron Shelley a time extension on his past-due account receivable.

30 The King Co. dishonored its note when presented for payment.

Apr. 30 Received payment of principal plus interest from M. Shelley for the March 1 note.

June 15 Accepted a $2,000, 72-day, 8% note dated this day in granting a time extension on the past-due account receivable of Ryder Solon.

21 Accepted a $9,500, 90-day, 8% note dated this day in granting J. Felton a time extension on his past-due account receivable.

Aug. 26 Received payment of principal plus interest from R. Solon for the note of June 15.

Sep. 19 Received payment of principal plus interest from J. Felton for the June 21 note.

Nov. 30 Wrote off King’s account against Allowance for Doubtful Accounts. Required.

  1. Prepare journal entries to record these transactions and events. (Round amounts to the nearest dollar.)

Analysis Component

  1. What reporting is necessary when a business pledges receivables as security for a loan and the loan is still outstanding at the end of the period? Explain the reason for this requirement and the accounting principle being satisfied.
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