Question

#2 (6 points) At December 31 of the current year, a company reported the following: Total sales for the current year: $5.320,000. Acoounts receivable balance at Dec 31, end of current year: $450,000 Allowance for Doubtful Accounts balance at Dec 31: 600 credit 1. Prepare the necessary adjusting entries to record bad debts expense assuming this company's had debts are estimated to equal: (a) 2.5% of credit sales. (b) 8% of accounts receivable. 2. Prepare the necessary entry to write off J. Mohr's 5800 A/R balance 3. Prepare the necessary entries to record the recovery of I. Mohr's A/R balance when he pays the company at later date. Debit Credit Accounts Part la Part Ib Show work below:

Answer 1

	Accounts	Debit	Credit
Part 1 a	Bad Debt Expense	$133,000
	Allowance for Doubtful Accounts ($5,320,000*2.5/100)		$133,000
	(To record the bad debt expense based on percentage on credit sale)
Part 1 b	Bad Debt Expense	$36,000
	Allowance for Doubtful Accounts ($450,000*8/100)		$36,000
	(To record the bad debt expense based on percentage on accounts receivable)
Part 2	Allowance for Doubtful Accounts	$800
	Accounts Receivable		$800
	(To record the write off of accounts receivable balance)
Part 3	Accounts Receivable	$800
	Allowance for Doubtful Accounts		$800
	(To record reversal of amount that was written off earlier)
	Cash
	Accounts Receivable
	(To record recovery of accounts receivable)