Question

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Answer 1

Part A:
Under income statement approach,Baddebt expense is computed as a % of credit sales.
Part B:
Credit sales=Total sales*75%=20000000*75%=$ 15000000
Baddebt expense=Credit sales*1%=15000000*1%=$ 150000
Date	Account titles and explanation					Debit	Credit
Sep 30.	Baddebt expense					150000
	Allowance for uncollectible accounts						150000
	(Baddebt expense recorded)
Income statement: Baddebt expense=$ 150000
Balance sheet:Net realizable accounts receivable=Accounts receivable-Allowance for uncollectible accounts=1500000-(30000+150000)=1500000-180000=$ 1320000
Part C:
Under balance sheet approach,Baddebt expense is based on the ending balance in accounts receivable or based on aging schedule
Part D:
Uncollectible as per aging schedule=$ 175000
This should be the balance in allowance for uncollectible accounts
Current balance in allowance for uncollectible accounts=$ 30000 credit
Adjustment required=175000-30000=$ 145000
Date	Account titles and explanation					Debit	Credit
Sep 30.	Baddebt expense					145000
	Allowance for uncollectible accounts						145000
	(Baddebt expense recorded)
Income statement: Baddebt expense=$ 145000
Balance sheet:Net realizable accounts receivable=Accounts receivable-Allowance for uncollectible accounts=1500000-175000=$ 1325000
Part E:
Uncollectible as per aging schedule=$ 175000
This should be the balance in allowance for uncollectible accounts
Current balance in allowance for uncollectible accounts=$ 30000 debit
Adjustment required=175000+30000=$ 205000
Date	Account titles and explanation					Debit	Credit
Sep 30.	Baddebt expense					205000
	Allowance for uncollectible accounts						205000
	(Baddebt expense recorded)
Income statement: Baddebt expense=$ 205000
Balance sheet:Net realizable accounts receivable=Accounts receivable-Allowance for uncollectible accounts=1500000-175000=$ 1325000