Question

Credit Losses Based on Credit Sales Gregg Company uses the allowance method for recording its expected credit losses. It estimates credit losses at three percent of credit sales, which were $900,000 during the year. On December 31, the Accounts Receivable balance was $150,000, and the Allowance for Doubtful Accounts had a credit balance of $12,200 before adjustment. a. Prepare the adjusting entry to record the credit losses for the year b. Show how Accounts Receivable and the Allowance for Doubtful Accounts would appear in the December 31 balance sheet. a. General Journal Date Description Dec.31 Bad Debts Expense Allowance for Doubtful Accounts To record allowance for credit losses. Debit 18,000 x O Credit 0 18,000 x b. (Do not use negative signs with your answers) Current Assets: Accounts Receivable Less: Allowance for Doubtful Accounts $ $ ✓ 150,000 30,200 x 119,800 X $

Answer 1

Date	Description				Debit	Credit
31-Dec	Bad debts expense				27000
	Allowance for Doubtful accounts					27,000
	(900,000*3%)
b)	Current Assets
	Account receivable					150,000
	less:Allowance for doubtful accounts					39200
						110,800